Anoto Group — Annual Report 2010

Apr 21, 2011

A n n u a l R e p o r t 2 0 1 0

2 0 1 0 i n bri e f

Contents

A word from the CEO	2
The Business Model	4
Anoto Products	10
Technology & Licensing	14
Corporate Responsibility	18
Management Repor t	20
Financial Repor ts	23
Notes	32
Audit Repor t	53
Corporate Governance	54
Board of Director s	58
Group Management	59
The Share	60
Five-year Summar y	62
Definitions	63
Annual General Meeting	64

Our partners' success is our success

0,3 mm Right Up Left Down WHAT DOES ANOTO DO?

Anoto develops pens that turn handwritten text and drawn illustrations into digital

information, enabling a multitude of possibilities for quick and reliable distribution and storage. Anoto's digital pen technology also creates opportunities to make information more interactive.

WHAT DOES ANOTO OFFER ITS CUSTOMERS?

Together with its partners, Anoto offers cost-saving and effective solutions for mobile registration of data and interactive applications. All of this is provided within a single system consisting of a software application, digital pens, and unique pattern technology.

WHO ARE ANOTO'S CUSTOMERS?

Anoto's end-customers operate in a number of different segments that require simple and mobile solutions to capture handwritten information. Examples include Healthcare, where our solutions are used for tasks such as registering medical journals, and Facility Management, in which many companies often use forms.

Other customers develop interactive conference and educational material for companies, students and pre-school children.

WHERE DO ANOTO'S REVENUES COME FROM?

Anoto's revenues primarily come from the sale of digital pens and technology licenses.

FIVE STRONG ARGUMENTS FOR ANOTO'S TECHNOLOGY

• It's as easy to use as pen and paper
• It's mobile and can be used anywhere without any great need for infrastructure such as computers and networks
• It's efficient information doesn't need to be entered twice
• It's a reliable but also a cost-effective and environmentally efficient solution
• It provides interactivity in a simple way

A year of change!

• Net sales for ²⁰¹⁰ amounted to MSEK ²⁰⁸ (206)
• The result after tax was MSEK -77 (-21).The result includes MSEK 50 for write-down and restructuring costs
• Due to the restructuring our operating expenses have decreased by MSEK 40 and we are well positioned to reach a positive cash flow from mid-2011
• Earnings per share amounted to SEK -0,60 (-0,16)
• Cash flow for the year was MSEK ⁰ (-19)
• Digital pens accounted for ⁵⁸ percent of net sales (43)
• Favourable development within whiteboard applications to which large volumes of digital pens have been delivered during the year
• Continued success both within the education sector and within healthcare where digital pen technology is steadily gaining ground

Key ratios for the group (SEK thousand) 2006 2007 2008 2009 2010

Net sales	108 725	122 733	143 975	205 862	208 395
Other income		19 180			–
Gross profit/loss	78 404	111 145	97 662	142 472	140 092
Operating profit/loss	-131 823	-19 592	-51 645	-20 848	-74 4751)
Profit/loss after tax	-133 006	-16 749	-60 903	-20 678	-77 326
Cash flow for the year	-31 649	-48 540	-31 957	-18 574	274
Earnings per share (SEK)	-1,03	-0,13	-0,47	-0,16	-0,60
Shareholders' equity per share (SEK)	3,56	3,52	3,80	3,65	3,07
Equity/assets ratio (%)	80	81	81	84	82
Average no. of employees	121	103	127	113	108

1) Incl.TSEK 50 335 for restructuring costs and write-down of capital development expenditures.

NET SALES (SEK THOUSAND)

Profit/Loss after Tax (SEK THOUSAND)

Cash flow for the year (SEK THOUSAND)

Equity/assets Ratio %

A clear path towards profitable growth

The past year brought quite extensive changes for Anoto.We restructured our operations, focused on profitability and growth and implemented changes in management. Net sales amounted to MSEK 208, an increase by MSEK 2 compared to the preceding year. I am not pleased with our operating result (MSEK -74), but Anoto's underlying development is nonetheless satisfactory and reflects an inherent strength on which we will continue to build.

Anoto's technology and products are unique and offer extensive market potential. Of that there is no doubt, but we must focus our resources where they will generate growth. Consequently, when I became CEO, the Board and I carried out a comprehensive review and analysis of Anoto.The result was a far-reaching but necessary reorganization where we cut our annual costs by MSEK 40, allowing us to reach profitability sooner.

Lower cost base to enhance profitability

In connection with the reorganization, we halted the development of the AFS platform. Fur thermore, we gathered our research and development effor ts to a joint unit in Lund. Unfor tunately, these effor ts entailed 30 employees in Lund and at our foreign units having to leave Anoto – a decision that is never easily made but one that was necessary in this case.

The restructuring costs that we charged against our income statement in 2010 amounted to MSEK 21, including change of management and redundancy costs.We also wrote down our capitalized development costs by MSEK 29, including the closedown of our development of the AFS platform and other projects demanding extensive development resources. No fur ther restructuring costs are currently planned. However, our liquid assets, which did not decrease in 2010, will be burdened in 2011 by payments related to the implemented reorganization at approximately MSEK 14.

Since we have managed to cut our total annual costs by 25 percent, our ability to achieve a positive result and cash flow from mid-2011 has increased significantly.The reorganization will not negatively affect Anoto's ability to develop and deliver products.

Closer and more developed partnerships give us opportunities to grow

By halting the development of our AFS platform, we underscore the fact that our par tners are best suited to developing solutions for end-users.Anoto will stick to doing what it does best – developing the world's foremost digital pen technology. Last year, millions of products and solutions based on our technology were sold around the world.

Anoto's strong position in the market and our good reputation also generate concrete business oppor tunities for our par tners.To ensure that our par tners receive the best possible suppor t, we will continue to restructure our par tner program in 2011 to better reflect customer needs and the resources of Anoto. is nonetheless satisfactory

Unique technology with global market potential

Regardless of technologies developed over the ages, the pen has remained one of the most impor tant tools in human communication. Few people make it through the day without using a pen at some point.

The market for our digital pen technology is truly global. It is easy to use and there are numerous application areas, many of which offer an extensive growth potential.To avoid spreading our resources too thinly, we are focusing on a few well-selected segments that we believe offer the greatest potential and where we have strong par tners, meaning that together we can successfully develop those segments.A key area is healthcare, where our technology is used in everything from repor ting in clinical studies to the registration of information in patient journals.

One of our par tners in the UK, for example, has achieved success by a solution that integrates digital pen and paper with BlackBerry® smar tphones.The solution enhances efficiency in administration for midwives making home visits, allowing them to spend more time with the mothers-to-be.

Another major area for us is the education sector.The use and acceptance of digital pen technology are making rapid progress and many of our par tners in this segment had a successful year in 2010. Our technology contributes to the development of exciting educational solutions for both classroom teaching and distance education.A good example is TNote, an innovative on-line solution for distance education, in which students use digital pen and paper, thus avoiding the limitations of keyboards.The solution has achieved great success in Korea.

Positioned for a promising future

In assessing the past year, I feel nothing but pride in how we at Anoto tackled a turbulent year. It demonstrates an inherent strength that will take us far and I want to take this oppor tunity to express my considerable gratitude to all employees.You did a great job in 2010 and I look forward to leading Anoto towards new successes together with you.

I also want to thank all of our par tners, who again demonstrated great loyalty and trust in Anoto and our technology. You spur us to aim even higher.And, in the light of the rapid devel-

opment now taking place, par ticularly in areas such as "cloud services", I am convinced that we face a promising future together.

Few would doubt the fact that Anoto offers a unique and proven technology.We have achieved clear success in many areas and, with a streamlined organization and lower costs, we enjoy better conditions than ever, even though a great deal of work remains.

Having visited a number of trade fairs and workshops over the year, I can repor t that our technology continues to arouse considerable interest. I become just as pleased every

time I see the reaction in someone's eyes when testing solutions and products developed by our par tners. Mostly, the spontaneous reaction is"I must have one of those". More than any analysis this convinces me that Anoto has a bright future.

Lund,April 2011

"Anoto's underlying development

and reflects an inherent strength on which we will continue to build"

Torgny Hellström CEO

Human needs continue driving the development of digital pen technology

The need to communicate anytime and anywhere is clearly greater than ever. Equally clear is the continuous role of pen and paper as mankind's most important tools when documenting, saving and disseminating information. New technological advances are gradually accelerating the global digitization process, which in its turn generates demands for easy, straightforward and secure transfer of written text and illustrations to various digital formats. This is where Anoto comes in.

Our core business idea is to combine the advantages of the simple and ever present pen and handwritten text with the unparalleled opportunities offered by digital documentation in terms of processing, storing and disseminating information. One major advantage of Anoto's digital pen technology is that users do not require any special skills to start using our partners'

products and solutions. Basically it's like using regular pen and paper, very little training is needed, and so beyond products and solutions cost is limited.

Another major advantage of our technology is its reliability. Our patented designs and unique image processing, combined with our partners' solutions for character recognition, allow handwritten text to be interpreted correctly. This minimizes the risk for incorrect information being transferred, and costs incurred when correcting collected data will be low.

A flexible business model

Our business model is founded on our unique technology and a demonstrated need for digital pen technology among end users. This is the origin and basis of all our business. Based on our technology we sell complete pens as well as pen parts. Thus we can sell both pens and applications as well as rights to use our technology and certain core components. This creates a level of flexibility that makes our business model attractive to a variety of partners. Through good relations with our partners we also generate conditions for the continuous development of our technology. Through our partners we reach the market and our end-customers. With a global network of partners, our digital pen technology is made available to a wide market – both geographically and in terms of different industries and segments. Our in-depth knowledge, and that of our partners, of end-customer needs allow us to reach potential users that may benefit from our technology.

Many people use solutions and products based on Anoto's technology in their work, while others benefit from it in their daily lives outside the workplace.

Anoto's Business model

Anoto's business model derives from the company's unique digital pen technology but is also influenced by end-user needs. With sales being conducted through partners, close cooperation throughout the process is the key to success for both Anoto and its partners.

Digital pen and paper is as easy to use as regular pen and paper. The handwritten information can be transferred to a computer placed anywhere in the world.

The pen's built-in camera registers its movements across a pattern of almost invisible dots on writing surfaces, such as paper forms, whiteboards, flip charts or books. The dot pattern is supplied as a data file, enabling users to print their unique pattern on regular paper or other writing surfaces.

Our unique dot pattern consists of tiny, nearly invisible dots printed on an imagined grid. The dot pattern encodes x and y coordinates over a large, cohesive area. The dot pattern can be printed on regular paper using a normal printer and both text and images can be printed on top of the pattern.

Bluetooth® Transceiver

Ink

Battery

Memory

Anoto's unique dot pattern consists of numerous small black dots that can be read by the digital pen. There are around 700,000 dots on an A4 sheet of paper.

Processor

The pen uses normal ink and the infrared camera is builtin, parallel to the ink cartridge. The camera takes 75 images a second.

A clear partner model for close relations

Our business model is indirect in the sense that we do not sell products based on our technology to end-users. All sales are conducted through our selected partners. Thus we quickly reach precisely the end-customers who want our technology. With their in-depth knowledge of end-user needs, our partners also represent a huge source of know-how from which to further develop Anoto's digital pen technology. This arrangement allows us to quickly and cost-efficiently pick up on trends, contributing to our success in the market and that of our partners. Our partnerships also bring the possibility that applications can be developed for several markets in parallel. We are thus able to rapidly increase our volumes without significantly increasing our cost base.

The market for Anoto's solutions and products is truly global. A well-developed partnership structure gives us a broad reach, both geographically and in terms of different market segments. Our organization is well adapted to the market and divided into two application areas: Anoto Products and Technology & Licensing.

Anoto Products focuses on systems, services and products primarily in forms management. Partners include systems integrators, software developers and IT consultants. The core of the offering is our digital pen and our unique dot pattern, on which our partners base their forms management solutions. Through solutions developed on Anoto technology, users around the world are able to collect and register data on paper and then transfer it digitally. The solutions are particularly advantageous in a context where data must be collected in a simple, costefficient and secure manner, also when those collecting the information are not seated at a desk with a computer.

To enhance the efficiency of our collaboration with our partners, we have developed a partner program. In order to reach the market more quickly, we drew up guidelines in 2010 for a better structure of our work with our partners. The intention is that Anoto partners who are able to engage their own partners, who in turn develop solutions and products based on Anoto technology, will be Qualified Channel Partners. In this way, we cut the time from the initial contact with Anoto to the implementation of the solution.

To further support our partners within Anoto Products, in 2010 we established a Partner Advisory Board, where we arrange regular meetings at which we discuss market trends and common challenges, while we also receive essential feedback from our partners on for instance product development.

Technology & Licensing develops and offers digital pens and associated customized technology for market-leading partners who develop their own product offers. These partners – Original Equipment Manufacturers (OEMs) – operate in segments like interactive learning, personal productivity and interactive education. What all of Anoto's OEM-partners have in common is that they are well established, they have market knowledge and their own distribution channels.

World-leading technology

The basis for our customer offers is our unique and patented dot pattern and our patented technology for digital pens. Whether we license pattern or technology or we sell readymade products, it is the pattern, or more correctly the algorithms generating and interpreting the pattern, that is the lowest common denominator found in our offers. The pattern algorithms are optimized for fast and precise tracing of a pen's movement on a surface, a condition for high accuracy for e.g. handwriting recognition applications.

In a few strategically important cases we have licensed our basic technology to business partners for their own development of end user products. However, in most cases we license and sell more complete components, products and solutions to our customers.

Attractive products for partners

Anoto's technology is often thought of as digital pens, while it covers much more. A digital pen can be used as any other pen, and it looks and feels almost like an ordinary pen. However, a digital pen can also register what is written or drawn, provided that is is done on a surface on which our dot pattern is printed.

The digital pen can transfer what is written or drawn either directly to a host, e.g. a personal computer or a mobile phone, or the information can be stored tem-

porarily in the

Brandon Major Vice President & COO, ExpeData – USA "Anoto digital pen and paper technology enables organizations to maximize their efficiency while allowing employees to continue using what they are already familiar with – pen and paper – resulting

in immediate business benefits. "

pen for transfer to the host on a later occasion, via Bluetooth or a USB wire. Some types of digital pens can read what has been drawn or written, in for instance children's books, and provide immediate feedback through the pen's built-in loudspeaker. Other pens have a built-in microphone enabling voice comments to be attached to notes and illustrations. The comments can then be played back via the loud-speaker in the pen.

We offer our customers complete digital pens, as well as key components, technology modules and tools (optics, electronics, mechanics, firmware) by which our customers may give their own pens the desired qualities. Anoto has a unique competence in the development of digital pens. Therefore, we often provide design help and other consultancy services to those of our customers who want their own types of digital pens.

The pattern can be created and printed by using some of our ready-made products, or by using what our customers create by using our development tools.

The Anoto Group also includes C Technologies, whose main product, the C-Pen, is a handheld scanner combined with character recognition, aimed at the consumer market. The user of a C-Pen can easily transfer text printed in e.g. books and magazines to for example a word editor. Text scanning is made row by row, allowing the user to control what is read and transferred. The C-Pen technology is also the basis for several consumer products offered by C Technologies' customers.

Continuous development contributes to success

Development represents an important part of Anoto's business. We are constantly striving to improve our technology to enable all of the different solutions and products that our partners and end-customers want. In 2010, we brought together all of our development expertise in one organization at our headquarters in Lund, Sweden, allowing us to better utilize the combined competence within Anoto.

Various revenue opportunities

Anoto has a well established and flexible revenue model. Our remuneration is based on the content of the solutions that our partners offer to the market. Our success depends on the success of our partners. By offering our partners payment solutions on delivery, license agreements and royalty based on the number of units sold, revenues are generated immediately and over time.

Anoto has two principal offers; complete solutions, giving our partners less flexibility but a shorter time to market and basic technology for partners seeking full control of their own development, often with a somewhat longer time to market. In the first case our revenues primarily come from direct payments for digital pens sold with attached license fees, but also to some extent from recurring license fees. In the second case our revenues primarily come from royalties, but in some cases also substantial one-time payments for digital pens, technology modules and key components.

Beyond remuneration for our products and solutions, we earn consultancy fees for non-refundable engineering (NRE), the time we spend on development. Anoto's largest revenue source by far is our sales of digital pens, including C-Pen.

Mats Beijer-Olsen CEO, XMS Penvision – Sweden

"Anoto is our most important partner. We are in daily discussions about business opportunities. We find Anoto very helpful and business oriented which is important to us when building a global market."

Revenue model

Products	Licenses	Royalties	Direct payment
Applications (end-users)
S oftware
Tools
Digital pens (incl. C-Pen)
Modules
Core components
Core algorithms
I ntangible rights/patents
Anoto's focus areas	Primary revenue		Secondary revenue

An expanding global market

Our digital pen technology can be used in a number of industries and segments, in large companies and small, and by private consumers in markets worldwide and regardless of language. By enabling the digital transfer of handwritten text and illustrations from various writing surfaces, our technology can also be used in situations where other data collection tools are impractical or too sensitive. The simplicity offered by wireless data transfer by for example a mobile phone means that solutions and products based on Anoto's pens and dot pattern can be used almost anywhere and anytime. Together with our partners we

reach markets in a way that we could not do alone. We reach companies and consumers in numerous industries and in countries on all continents. To avoid spreading our resources too thinly, we have in consultation with our partners prioritized efforts in a number of segments, where we perceive the greatest future potential for our technology.

One of Anoto's most important and largest segments is healthcare. In an environment where pen and paper still, along with computers, are the principal tools for the registration of data, digital pen technology is continuously gaining ground. With a digital pen solution, healthcare personnel avoid spending excessive time transferring data from paper forms to computers. An additional benefit is that data can be collected from wherever patients are located, further minimizing the risk of incorrect data being registered. Experience shows that on average it takes just fifteen minutes to learn how to use a digital pen, further increasing its suitability to activities as varied as those in the healthcare sector. However, it is not only in day-to-day care that Anoto's solutions are employed. The technology is also well suited e.g. for clinical trials, where standardized forms are frequently used and where the accuracy of the collected data is decisive for the scientific results.

The education sector is another important and growing segment where our solutions are used. Within education of children as well as of adults pen and paper remain the most important tools used to note and save information on notepads as well as whiteboards. Anoto's dot pattern can be applied to different large or small surfaces, even LCD screens, so there are many areas of use in the modern education sector. Since the technology is built into the pen, screens and other surfaces do not require any special maintenance, which represents another key advantage in terms of cost. In addition to educational products, another segment is emerging - children's books. Anoto technology gives children's reading experience an additional dimension when selected passages can be read aloud using the pen's speaker.

Ken Schneider CEO, Adapx – USA

"To grow our business, we've had to be nimble, responsive to customers, and anticipate their needs. Anoto shares those values."

Other key segments where Anoto's digital pen technology has achieved success include the construction sector, public administration, banking and finance, as well as transport and logistics. In all of these, solutions and products based on our technology have been adapted to specific demands of the users and their need to quickly transfer handwritten text and illustrations to a digital format.

Anoto Products focuses primarily on forms processing

According to Gartner, the world's leading information technology research and advisory company, 85 per cent of all business processes begin with a form. This is the market at which Anoto Products is aimed. Anoto Products focuses on systems, services and products primarily within forms processing. Anoto uses an indirect business model and goes to market via partners, including system integrators, software developers and IT consulting companies. These partners offer corporate customers and end-users customized and standalone solutions based on Anoto's digital pen and paper technology. Anoto Products also includes the original C-Pen, which is used to capture and register selected information from printed sources such as books and magazines. We also sell other complete products, such as scanning and translation pens.

Restructuring for more efficient market reach

In order to reach the market more efficiently, Anoto implemented a new go-to-market strategy during 2010, with focus on Anoto partners. A new partner initiative was launched, the Qualified Channel Partner program, which identifies Anoto partners who have their own established partner networks, partner programs and platforms. These are the partners Anoto encourages potential partners to align with. To provide further support to partners within Anoto Products, a Partner Advisory Board was established. Together with the partners on the Advisory Board regular meetings are arranged where we discuss market trends and common challenges, and also receive essential feedback on for instance product development.

In 2010 Anoto also made a decision to primarily support its partners' products and platforms. As a result the development of Anoto's platform AFS was discontinued. The decision underlines Anoto's commitment to a partner-centric business model. The discontinuation of AFS together with the gathering of

research and development efforts to one unit in Lund unfortunately meant that 30 employees in Lund and at our foreign offices had to leave the company. The restructuring will not diminish Anoto's ability to support its partners.

Our offering

Anoto Products sells Anoto's digital pens, pattern and licenses to its network of partners. Anoto's partners in turn, create customer solutions based on Anoto's technology and products, for public and private sector customers across the globe. Anoto supports its partners by providing them with development tools, by which they can develop their own platforms and products. This shortens time-to-market for all parties and ensures quality solutions.

A simple, effective and reliable solution

A key advantage of digital pen and paper is that it is as easy to use as a regular pen and paper, which means considerably lower costs for training, support and maintenance compared with other digital technologies. In addition, digital pen and paper allows for faster processes, less risk of errors, greater productivity and other tangible cost-savings, since there is no need to duplicate the registration of information or to have copies of documents. Moreover, eliminating copies of documents makes for environmentally efficient solutions.

A good example of an end-customer within the Anoto Products area is ADAC-Luftrettung GmbH, Germany's largest air rescue service. Every year, ADAC takes off on thousands of rescue flights in Germany. The documentation made by the medical staff is of particular importance on each operation. Location, time and patient data, including vital signs, must be carefully recorded. This information is needed for follow-up treatment in the hospital after rescue operations, for adminis-

A n oto Pr o d u c t s

tration purposes and to settle charges with the various service providers, such as health insurance funds and insurance companies. With the help of "dotforms® rescue", a digital pen and paper solution developed by Anoto partner Diagramm Halbach, data capture has become error free and four to five times faster than before. The patient data collected with the digital pen is transferred from the pen to a database via a docking station. Upon docking the pen, the digital information is immediately made available through the database. At the same time, a paper form is retained and accompanies the patient to the hospital, where hospital staff can provide immediate and appropriate care based on the information in the form.

Other examples of applications are doctors' medical journals, parking tickets and order and inspection forms. Anoto's digital pens are especially suitable in situations where information is collected by non-deskbound staff.

User friendliness is a key competitive advantage

Anoto's digital pen and paper is a unique and patented technology. There are few direct competitors to Anoto's digital pen and paper solutions for data capture using forms. Anoto mainly competes with other types of technology, such as tablet PCs, laptops and smartphones. Market development is driven by increased knowledge about digital pen solutions and penetration in existing and new markets, as well as the need for cost effective and user friendly solutions. Independent surveys and end customers both demonstrate that Anoto's digital pen and paper technology is more user-friendly for data capture than other available technologies. Another competitive advantage is that Anoto has a devoted partner network with partners in more than 50 countries. Customers in a number of documented rollouts have confirmed that the total investment for a solution with Anoto's digital pen and paper generates significant cost benefits compared with PDAs and smartphones. In conclusion, the advantages of digital pen and paper are faster paper based processes, less risk of error, greater productivity and tangible cost savings.

Guillaume Juge

Managing Director, Kayentis – France

"It is a real pleasure to work hand in hand with the people at Anoto. They show a real will to understand our needs and the needs of our customers. We really praise and value this fast growing partnership spirit."

OFFERING:

Digital pen, pattern and licences which together enable a customer-specific application

Important events in 2010

• Anoto implemented a new go-to-market strategy with focus on Anoto partners in order to reach the market more effectively.
• In order to further align the new go-to-market strategy Anoto initiated a Qualified Channel Partner program and a Partner Advisory Board.
• Anoto's platform AFS was discontinued.
• Anoto Inc reported a growth of 16 per cent.
• Anoto partner DevelopIQ and client Portsmouth Hospitals NHS Trust won a BlackBerry® Wireless Leadership Award.

Financial performance

Tarek Ghouri Managing Director, Ubisys – UK

"When compared to other mobile solutions the biggest unique selling point is that Anoto technology minimizes change in working practices whilst offering businesses the benefit of immediate availability of digital data."

Improving productivity among repair technicians

Challenge

Solution

Tedious work process

The US based company, Safelite® AutoGlass, employs more than 3,700 field technicians to repair and replace windscreens for over 3.1 million US customers annually. Previously, Safelite's process consisted of dispatching technicians and providing administrative reporting manually. Each day, at the beginning of their shift, technicians were required to drive to a central location to pick up work orders and return at the end of their shift to drop off their complete paperwork. The only way a staff member could alert the technician about work order changes was to call him on his two-way Nextel BlackBerry®. These calls were distracting to the technician, especially if he was in the middle of a job. Work order changes, i.e. changes to appointment time and contact numbers, happened any time a day, and work orders were printed five times a day, creating wasted paper. The process required numerous steps to obtain approval prior to beginning the work and to receive final authorization to process payment. This delayed the ability to issue claims to insurance companies and to keep track of the billing cycle at the home office. Safelite therefore decided to create a solution that could manage field tasks wirelessly.

New solution revolutionizes field work

Safelite selected the ExpeData® Enterprise Digital Writing Platform based on Anoto Digital Pen and Paper technology for creating a solution that would prevent the multiple steps, phone calls and paperwork previously needed. With the new Mobile Resource Management solution, technicians use BlackBerry smartphones to clock in and receive work orders for the day. When they clock in, the customer information is displayed. The technician makes a call to let the customer know that he's on his way. The driving directions provided by the GPS gives the technician an estimated time of arrival. Once the technician arrives at the customer's site, a job preparation screen shows on the BlackBerry smartphone. The technician enters the required information, which triggers a work pre-authorization form. Using a portable thermal printer, the technician prints the form on paper with the Anoto dot pattern. The customer signs the form with a digital pen from Anoto. The data is transmitted from the pen via Bluetooth® to the BlackBerry smartphone where it is processed and then routed, using ExpeData's routing software, to Safelite's Enterprise Digital Writing server. Once the windscreen is replaced, the technician hits a button on his smartphone and Safelite's tender shows up on the screen. The technician swipes the customer's credit card and receives immediate approval. A receipt is printed and the customer signs it with the digital pen. The pen transmits the data to the BlackBerry smartphone and then on to Safelite's server.

Result Realigned business process yields success

The advantages with the digital pen and paper solution are many. The new process is less timeconsuming and Safelite is now able to assign one more job to be completed every day to each technician. The overall productivity of the technicians has increased by seven per cent, and as technicians now can communicate more effectively, there has been a drop in the number of cancelled jobs by almost 25 per cent. Not only has the increase in productivity been tremendous, there has also been a reduction in the back-office handling of paper. Customer inquiries are able to receive attention within the same day and the work orders are processed nearly in real-time. The solution has also proven environmentally friendly. As technicians no longer have to drive to the office each morning or evening, major fuel savings have been done. Furthermore, the amount of work order paper used has been reduced by 80 per cent. Another benefit is the high-tech impression that Safelite leaves with its customers. "When customers see that we are willing to invest in creative technology in order to provide the highest level of service possible, it creates a priceless environment of trust and security", says Nate Beckman, Project Manager, Mobile Resource Management, Safelite. Today, Safelite has 5,300 digital pens deployed.

Setting the record straight

Heavy administrative burden

Portsmouth Hospitals NHS Trust is situated on the south coast of England and provides a full range of acute services to a population of over half a million people. The maternity department's midwives provide ante-natal care in the homes of expectant mothers, and document everything they do in an 80-page paper form known as the Maternity Notes form. The purpose of the form is to track the mother's health and the baby's development during the pregnancy, and the mother is instructed to bring the form to the hospital for the birth. The form is updated by the midwife on each home visit and upon return to the hospital the midwife needs to enter the information into the hospital's record keeping system by typing it in. There were several shortcomings with this system. The administrative burden for the midwives was heavy and on occasion, information would be mistyped and updating the hospital record would be overlooked. Furthermore, the Maternity Notes form could get lost, or the mother to be and her partner could forget to bring it to the hospital for the birth, due to the stress around the onset of labor. The Trust therefore decided to look for a new solution that would streamline business processes and improve the quality of service provided to its patients.

Information transfer by ticking a box

Since March 2010, the midwives at Portsmouth Hospitals NHS Trust use a digital pen and paper solution from Develop IQ. The solution consists of a digital pen, a Maternity Notes form with the Anoto dot pattern and a BlackBerry® smartphone. When the midwife wants to send patient data recorded in the Maternity Notes form to the maternity records system, she simply ticks a box on the form. The pen sends the data to the BlackBerry smartphone via Bluetooth®. Once the smartphone receives the data, it encrypts and sends it to the BlackBerry Enterprise Server installed in the Trust's data centre, from where it is then transmitted to the maternity records system. Alerts are sent back to the midwife to confirm successful or unsuccessful form completion. There is no longer any need for the midwife to return to the hospital to manually type in data from the Maternity Notes form into the maternity records system. The handwritten notes are instead transferred right into the maternity records system by simply ticking a box.

Challenge

Solution

Result

More time to care

The digital pen and paper solution has proven very valuable to Portsmouth NHS Trust, patients and midwives. It has freed up "time to care" equivalent to five full time midwives. Across a typical midwife's schedule, the solution has halved the time spent on administration, from 98 minutes to 48 minutes per episode of care, enabling midwives to provide more patient care within their scheduled working hours. Furthermore, by having patient records safely stored by the Trust, mothers are reassured that if their physical records booklet is mislaid or becomes damaged, their midwife can just request a new printed version of the notes which would contain full details of the check-ups and care given. The digital pen and paper solution began to pay for itself already during the first year and the Trust estimates that the solution will yield £220,000 in efficiency savings already in the second and third year respectively. Today, 130 midwives and their patients are benefitting from the solution and Portsmouth Hospitals is thinking about expanding the usage to other departments.

Technology & Licensing for education

Technology & Licensing develops and sells digital pens and related technology on an OEM-basis to market leading customers. These customers develop their own product offerings based on the technical components and pens that they purchase from Anoto. Examples of these sorts of products are educational toys and tools, equipment for visual communication such as whiteboards, and solutions within the field of personal productivity. A number of these products are interactive, providing real-time audio and visual feedback as users touch or write on interactive areas, i.e. surfaces with the Anoto dot pattern on.

Our offering – a complete system

Technology & Licensing customers are offered either complete pens on an OEM-basis, or pen technology that they can use to develop their own pens. Examples of customers that buy complete pens include TStudy and Hamelin, while Livescribe™ and LeapFrog are examples of customers that have developed their own pen products. When we offer pen technology for development of customized pens, partners cooperate closely with Anoto's development department before a final product reaches the market.

Three integrated technologies

• Solutions based on three integrated technologies:
• Pen technology that comprises hardware and software components that can be incorporated with other products or form the basis for new products.
• Software modules for the management of pattern and design, as well as print-out. The pattern can be printed out using standard offset, digital and laser printers and can even be printedon surfaces such as whiteboards, glass and LCD screens.
• Anoto's API for software which is used to develop, analyze, process and manage information from the pen.

Better opportunities to create customer value

Anoto's digital pen technology replaces existing technical solutions in a more cost-effective and userfriendly way than other existing technology. The solution often results in a better ability to interact and sometimes leads to the creation of entirely new categories of products. An example of this is the echo™ smartpen from Livescribe, which uses Anoto's technology to index sound recordings from events such as lectures. Users can add audio recordings from a lecture to their notes and play them back as often as they like.

Extensive cooperation with strong partners

Anoto enters into a smaller number of cooperation agreements within its Technology & Licensing area, but these are larger in scope. Customers have their own marketing, distribution channels and unique market segments. The digital pens and solutions are usually unique for each customer, which means that cooperation makes considerable demands on development and resources in the start-up stages.

During 2010, TStudy launched three new interactive products: TNote, a solution that facilitates distance learning; Symphony, a classroom learning solution and DOTnote, a simple and effective note-taking solution. PLUS, a company that manufactures portable interactive whiteboards based on Anoto technology, launched UPIC Notepad, an innovative presentation and meeting tool.

TE C H NOLOGY & LI C ENSING

Better performance provides competitive edge

The competitive advantages of Anoto's technology over other solutions include its cost-effectiveness, flexibility and performance. Surfaces such as whiteboards, flip charts and books are simple to use and require no built-in electronics. They work using Anoto's unique dot pattern, which is read by a pen. The intelligence is in the pen, and the same pen can be used on different types of surfaces and multiple pens can be used on the same surface. In addition, the technology is equally precise over the entire surface, regardless of its size.

The picture shows Livescribe's echo™ smartpen. The pen captures meetings and lectures and its speaker plays back recorded audio.

OFFERING:

Technology & Licensing offers customers a complete system, providing for a range of products, based on three components: Digital pen technology, paper/surface and pattern, and applications.

Important events in 2010

• Technology & Licensing demonstrated a solid growth of 29%.
• TStudy launched a portfolio of interactive products: TNote, Symphony and DOTnote.
• PLUS introduced UPIC Notepad, an innovative presentation & meeting tool.
• Livescribe™ introduced its new interactive pen, echo™ smartpen.

Financial performance

The picture shows LeapFrogs' pens Tag™ Reader and Tag™ Junior. The books are printed on paper with Anoto's unique dot pattern, which enables the pens to read text och illustrations. The pens have built-in spekers, allowing children to listen to their favourite stories.

Anoto Annual Report 2010 | 15

Top-notch learning at a distance

Challenge

Solution

Inefficient distance learning

Distance learning is growing rapidly in Korea and around the world thanks to the development of the Internet. However, several key constraints have hindered the effectiveness of distance learning classes. One of the greatest stumbling blocks is the difficulty to enter mathematical formulas, not to mention using character based languages, such as Korean or Chinese. With over 200,000 students and 4,500 teachers spread over 900 campuses, Korean company Time Education is one of the largest comprehensive education companies in Asia. Time Education saw an urgent need to improve distance learning for students in Korea and elsewhere, and therefore began to search for an innovative, cost-efficient technology that would overcome these obstacles.

Online digital pen and paper solution works its magic

Time Education selected TNote, an innovative online solution from TStudy, based on Anoto technology. TNote re-introduces pen and paper to overcome the shortcomings of keyboard based data entry in distance learning. It frees students from the constraints of the keyboard, which has been the single biggest limitation in distance learning. It allows them to easily input thoughts and ideas through the use of a digital pen and note paper imprinted with the unique Anoto dot pattern. By simply ticking a box, written documents can be sent directly from the note paper on which they are written, with the help of a mobile phone. Complex mathematical formulas, drawings and character based languages can be viewed immediately in a shared online study area. TNote's document sharing features mean that teachers and students can easily share materials and review their work together, wherever they are in the world. Students can send their work to their teachers wherever and whenever it suits them, without being tied to a computer all the time.

Result Closing the gap between teachers and students

With TNote, students are no longer as frustrated when doing their assignments. They simply write their texts and create their drawings and formulas as they would with regular pen and paper. Furthermore, they do not necessarily have to sit in front of a computer when working on assignments. As long as students have access to paper with the Anoto dot pattern, a digital pen and a mobile phone, they can complete and submit their assignments virtually anywhere. Moreover, through the shared online study area, teachers can pinpoint each student's strengths and weaknesses and even give feedback in real time. By using digital pen and paper along with the versatility of information sharing, TNote has dramatically increased both the accessibility and the convenience of distance learning. At the same time, it has closed the gap between teachers and students.

Turning classroom learning into team work

Transporting classrooms into the digital age

In most classrooms around the world, students and teachers still depend on pen and paper, as they have done for hundreds of years. Likewise, lecture based learning continues to dominate instructional systems, despite its proven limitations. At the same time, the increasing focus on information and communication technology in school curriculums is putting education systems under pressure to move teaching into the digital age. In support of the digital education drive, Korea's TStudy has created Symphony, a modern interactive classroom system capable of linking the well established benefits of pen and paper to the digital world. Time Education, one of the largest comprehensive education companies in Asia, saw an opportunity to turn its classrooms into 21st century interactive learning environments and decided to roll out Symphony across its schools in Asia.

Challenge

Solution

Result

Enter the digital pen

The Symphony system is an interactive solution that aims at creating a one-on-one learning environment in a classroom setting. It replaces traditional, one-directional lecturing with a more studentcentric, interactive and 'fun' approach to learning. Students use a digital pen to take notes or solve problems on paper imprinted with the Anoto dot pattern. Using the pen's integrated Bluetooth® module, their work is then transferred to the teacher's PC and displayed on a screen or interactive whiteboard for the whole class to see. Teachers can evaluate each student's way of thinking and give targeted feedback, while students may compare their work with their classmates. All work can be stored electronically, enabling teachers to monitor the progress of their students more easily. They can also set and administrate exams, which Symphony then grades and analyses automatically.

Discussions and teamwork replace lecturing

Symphony enables a new style of classroom teaching: It enhances the motivation and creativity of the students, since they participate actively, sharing and comparing their work in lively discussions. The system also makes it easier to address individual students' learning challenges, which teachers often find hard to attend to in traditional classroom settings. Symphony allows not only teachers but also students to provide scholastic inspiration within the classroom, by facilitating a teamworking environment. The success of this approach has been highlighted in a study led by Hitachi Research Center and Tokyo University, which surveyed nearly 5,000 students. It found that the use of the digital pens had improved exam grades by more than 40 per cent, and that the Symphony system was helping to cultivate logical thinking among students.

Employee knowledge drives us forward

Anoto is a continuously developing company. In times of adversity we have always managed to pull through and prove that our technology is unique. This has only been possible thanks to an organization that works together towards a common goal – to establish Anoto's digital pen technology as the global standard.

Underlying our way of working are three clear values that pervade everything we do. These underscore the fact that we will achieve success by working together, in a focused and effective manner and with our partners' best interests at heart.

• We put the customer in focus
• We think and act with a sense of urgency
• We work as a team

Guidelines towards the right way

We need a multitude of skilled employees who are wholeheartedly engaged in their work and have a good understanding of the communication between people from different cultures and backgrounds, regardless of gender, to realize the company's business concept. At Anoto we strive to make use of all our employees' competencies in the best possibly way. No employee should under any circumstances be discriminated against. We apply a clear policy on gender equality, equal opportunities and anti-discrimination. At Anoto we place great value in maintaining an open and clear communication with all parties.

Prioritizing continuous competence development and transfer of knowledge

In a knowledge based company like Anoto, employee competencies are our most important assets. Without adding knowledge and transfer of knowledge between colleagues, the company cannot develop. This is why competence development is a priority at Anoto. Development efforts are determined individually to ensure that the goals and ambitions of both the employee and the company are met.

During 2010 we partly reorganized the company and concentrated our development resources to our head office in Lund. It is now easier to share knowledge within the company.

Anoto has a highly educated work force; 90 per cent of its employees are university graduates.We also have a favourable level of gender equality although technical areas reflect the predominance of men that is already evident at universities and colleges. For the time being the gender division lies at 30 per cent women and 70 per cent men. Towards the end of the year, Anoto had a total of 87 employees.

C o r p o rat e R e s p o n s i b i l i t y

A creative and flexible work environment

For the past eight years Cecilia Perklev has managed Anoto's patent work. It is an important position in a company where immaterial rights play a great role in its business. Her work means many international contacts with patent authorities and patent attorneys in countries where Anoto's products and solutions are sold.

"It's very inspiring to work with patenting in a company like Anoto. We have developed a new and exciting technology and from the outset management understood the importance of building up a strong patent portfolio to protect our investments," says Cecilia.

Although Cecilia's tasks differ from those of many of her colleagues, there are still many things that they have in common, she confirms:

"Anoto is characterized by its many competent and creative employees. It is also a flexible work place where you are expected to take on great personal responsibility. This can of course be a challenge, but there is a great deal of enthusiasm and clear determination from everyone to contribute to spreading our unique technology further and further."

MANAGEMENT REPORT

The Board of Directors and CEO of Anoto Group AB (publ.), Corporate Identity No. 556532-3929, hereby submit the annual accounts and consolidated accounts for the January 1 – December 31, 2010 financial year.

GROUP STRUCTURE

Anoto Group AB is the parent company in the Group and performs group-wide functions and sales only to its subsidiaries. The operational activities are performed by the subsidiaries Anoto AB, C Technologies AB, Anoto Inc. and Anoto Maxell K.K.

ORGANIZATION

Anoto Group is a Swedish high-tech company that has developed a unique technology for digital pen and paper, enabling rapid, reliable transmission of handwritten text and illustrations to digital form. The organization is divided into two application areas, Anoto Products and Technology & Licensing. The entire business is based on digital camera technology and image processing in real time.

ANOTO APPLICATION AREAS

ANOTO PRODUCTS

Anoto Products focuses on systems, products and services, primarily in the field of forms processing. Anoto operates through an indirect business model marketing its products through partners, such as system integrators, software developers and IT consulting firms, all of which offer customized solutions with Anoto Digital Pen and Paper technology to their corporate customers and field users. Turnkey products, such as existing scanning and translation pens, as well as newly developed products including Anoto penPresenter and Anoto penDocuments, may also be marketed through other sales and distribution channels.

The development within Anoto Products has been declining during 2010, with a fall in sales of nine per cent. Net sales amounted to MSEK 116. A large number of end-users to Anoto Products' partners are found within the healthcare sector and other public sector areas in several countries in Europe. The public sector is still being adversely affected by the financial crisis that broke out in the autumn of 2008, with lower tax revenues as a result. This has led to the postponement of projects where Anoto Products digital pens and licenses are included.

To speed up the sales process Anoto Products developed its own software platform, Anoto Forms Solutions, AFS. This platform was ready for launch in late 2009. As sales of the platform did not fulfill expectations, a decision was taken to terminate further development and sales of the AFS platform, in connection with a decision taken in October 2010 to restructure the company. Anoto will continue to support and maintain the platforms that have been delivered. However, future sales will be directed through existing partners. These existing Anoto partners have long developed their own software platforms tailored to the various IT solutions they provide their partners with. Along with these major partners Anoto has created an Advisory Board in order to improve and expand business opportunities and product development.

Also included within the application area Anoto Products is C Technologies, which markets and sells C-pen, a reading- and translation-pen. The development of C Technologies has been good with a small increase in sales compared to previous years.

TECHNOLOGY & LICENSING

Technology & Licensing develops and sells digital pen technology and digital pens on an OEM basis to market leading customers. The customers develop their own product offers based on technology components and pens provided by Anoto. Several of these products are interactive, enabling real-time audio or visual feedback while writing or when touching interactive areas. Customer developed products are e.g. learning toys, educational tools, visual communication equipment and personal productivity solutions.

The development of sales within Technology & Licensing was 28 per cent in 2010, and sales amounted to MSEK 81.

The partnership that began in late 2009, with TStudy Co. Ltd. in South Korea, has developed as planned during the year and Anoto has delivered a large number of digital pens for use in schools run by TStudy.

The developments within whiteboard applications based on Anoto technology are unfolding well and Anoto has during the year delivered large volumes of digital pens to partners who manufacture such applications.

To further broaden its product range, Anoto has together with a partner developed a simpler digital pen which will be offered to customers, particularly within the education area, within the near future.

Partners (e.g. Livescribe and LeapFrog) who develop their own products based on Anoto technology have during the year had a favorable outcome, which has resulted in an increase in royalty revenue for Anoto by 62 per cent compared to last year.

SHARES AND SHAREHOLDERS

The company had 128,583,867 shares as of year-end. According to Euroclear Sweden AB statistics, there were 5 975 shareholders on December 31, 2010, representing a decrease of approximately 28 per cent over the past 12 months.

In early March 2010, Korean company Aurora Investment Ltd., expressed to Anoto shareholders that the company wished to acquire a 20 per cent stake in Anoto. Anoto shareholders were offered to sell their shares at a price of SEK 5.40 per share. The Aurora Investments Ltd share in Anoto now amounts to 17.1 per cent of the total amount of shares. Aurora Investments Ltd is a subsidiary of KDB TStone Private Equity Fund, South Korea, which also is the parent company of TStudy Co. Ltd. During 2010 Norden Technology AS has divested all of its shareholding in Anoto representing 7.4 per cent.

The largest shareholders were Aurora Investment Ltd (17.1 per cent of the votes and capital) and Essensor AS (11.9 per cent of the votes and capital).

EMPLOYEES

The average number of employees within the Group decreased from 113 to 108 in 2010. The Group had 87 employees (107) at the year-end.

EXECUTED RESTRUCTURING 2010

During 2010 a major restructuring was carried out in Anoto in order to create a cost level that is expected to yield a positive result and cash flow during 2011. As a result of the restructuring a large part of the company management is new and the workforce has been reduced by approximately 30 positions to around 90 positions. The total cost of the restructuring, including redundancies and change of company CEO, has been charged to 2010 earnings by MSEK 21. The workforce reduction will not negatively affect Anoto's ability to develop and sell its products. In addition to this, the previously capitalized development costs for products and systems that have either closed down or are deemed to have little value in the future, including the close-down of the development of our AFS platform and other projects demanding extensive delelopment resources, have been written down by MSEK 29. The total restructuring has been charged to the 2010 result by MSEK 50. Further costs are not expected. However, the cash flow will be negatively affected during 2011 by about MSEK 14.

REMARKS ON THE STATEMENT OF COMPREHENSIVE INCOME

Net sales for the year increased by one per cent, from

MSEK 206 to MSEK 208. 65 per cent of the Group's income is in USD and 21 per cent in EUR. During the year, the Group hedged its currency net flows in USD, EUR and JPY over the next six month period. (Refer to the section on risk management.) The Group's gross profit for the year decreased slightly to MSEK 140 (142), and its gross margin was 67 per cent (69). The gross margin is more or less unchanged in spite of a greater portion of sold hardware, digital pens. The portion of sold digital pens now represents 58 percent (43) of the total net sales. Overhead costs increased during 2010 by MSEK 52 compared to the previous year. The major reasons for the increase refer to the restructuring costs and write-down of capitalized development costs that were executed in 2010. Total one-time cost amounts to MSEK 50. The Group capitalizes non-customer financed development expenses meeting the IAS 38 criteria, a total of MSEK 8 (4) in 2010. The operating result for the year was MSEK -74 (-21).

REMARKS ON THE STATEMENT OF FINANCIAL POSITION AND THE STATE-MENT OF CASH FLOWs

The total assets dropped by MSEK 75, mainly because of the result of the year including MSEK 29 for writedowns of capitalized development costs. The cash flow for the year was MSEK 0, resulting in unchanged liquid assets at MSEK 81. Long and short term liabilities increased by MSEK 1 to MSEK 88. Out of the liabilities MSEK 30 represent prepaid royalty, for which Anoto has no obligation to repay or deliver any services. The Group's liquid assets, including current investments, were MSEK 81 at the end of 2010, which is unchanged compared to the preceding year. Shareholders' equity of MSEK 395 on December 31, compared to MSEK 469 last year, represented an equity/assets ratio of 82 per cent (84). The cash flow from operating activities was MSEK 15 (-23).The working capital decreased by MSEK 43. Investing activities consumed MSEK 15 (15), of which MSEK 8 (4) for capitalized development expenses during the year. Financing activities amounted to MSEK 0 (19). The total cash flow for the year ended up at MSEK 0 (-19).

INVESTMENTS

Capital expenditure in 2010 totaled MSEK 15 (15).

RESEARCH AND DEVELOPMENT

The Group's R&D efforts are focused on upgrading and integration of electronic hardware and software for the development of digital pen and paper solutions. The Group spent MSEK 69 (64), or 32 per cent (39) of its total operating costs, on R&D in 2010. The number included MSEK 5 (5) for amortization of capitalized development expenses. Pursuant to its compliance with IAS 38, the Group capitalized MSEK 8 (4) in new development expenses during the year. Including capitalization, the Group's total 2010 R&D costs totalled MSEK 77 (68). Anoto has an extensive patent portfolio. At the end of 2010, the Group had 212 active patent applications and 369 registered patents.

DISPUTES

Anoto is currently not engaged in any dispute deemed to significantly affect its financial position.

ENVIRONMENT

Anoto does not pursue any activities that require environmental permits. None of its units are environmentally certified.

RISK MANAGEMENT

The Group conducts the main part of its sales internationally, thus a majority of the contracts is in EUR USD or Yen. As a significant part of the costs is in SEK and USD, margins and earnings are sensitive to currency fluctuations, mainly in Euro. The subsidiary Anoto AB handles all trading in financial instruments aiming at reducing the Group's currency exposure. In 2010, approximately 65 per cent of the total income was related to USD and 21 per cent to EUR. Refer to Note 4 for a detailed description of the company's risk management policies.

The BOARD AND ITS RULES OF PROCEDURE

The Anoto Group AB Board of Directors consists of five regular members. Refer to page 54-57 of this Annual report under the section entitled "Corporate Governance Report" for a detailed account of the Board's composition and working methods. The 2010 Annual General Meeting authorized the Board to decide on one or more directed share issues totaling no more than 12,000,000 shares prior to the next Annual General Meeting – as well as to depart from the preferential rights of shareholders in order to enable the acquisitions of businesses or operations by paying wholly or partially with shares.

GUIDELINES ON REMUNERATION FOR SENIOR EXECUTIVES

Remuneration for the CEO and senior executives in 2010 appears in Note 9, "Salaries and other remunerations". The Board has proposed to the Annual General Meeting that the guidelines on remuneration for senior executives remain unchanged in 2011.

SIGNIFICANT EVENTS AFTER YEAR-END

No significant events have occurred after the year-end.

OUTLOOK

During the last quarter, a restructuring of Anoto's business have been conducted which inter alia has meant that staff numbers have been reduced from around 110 employees to 80 and that the number of external consultants has been reduced. As a result, overhead expenses are expected to decrease by about MSEK 40 to around MSEK 125-130. After several years of loss, we are now convinced that these measures will lead to positive growth and a positive cash flow.

PROPOSED APPROPRIATION OF ACCUMULATED RESULT

Proposed appropriation of accumulated result in the parent company (SEK):

Total	-14 919 889
Loss for the year	-45 590 121
Profit brought forward	2 114 878
Share premium reserve	28 555 354

The Board of Directors and CEO propose that the accumulated deficit of SEK -14 919 889 reduces the statutory reserve by the same amount.

With regard to the financial position of the Group and parent company, refer to the following accounts.

STATEMENT OF COMPREHENSIVE INCOME

			Group
(SEK Thousand)	Note	2010	2009
Net sales	5	208 395	205 862
Cost of goods and services sold	11	-68 303	-63 390
Gross profit/loss		140 092	142 472
Selling expenses	8,9,14,33,34	-96 457	-83 951
Administrative expenses	8,10,14,33,34	-23 188	-20 225
Research & development costs	8,14,34	-68 826	-63 731
Other operating income	12	4 727	5 981
Other operating costs	13	-30 823	-1 394
Operating profit/loss	11	-74 475	-20 848
Financial income	16	420	1 433
Financial cost	16	-3 217	-1 520
Profit/loss before taxes		-77 272	-20 935
Taxes	18	-54	257
Profit/loss for the year		-77 326	-20 678
Other comprehensive income/cost
Translation differences for the year		1 049	94
Tax attributable to items in other comprehensive income/cost		-	-
Other comprehensive income/cost for the year		1 049	94
Total comprehensive income/cost for the year		-76 277	-20 584
Total profit/loss for the year attributable to:
Shareholders of Anoto Group AB		-75 527	-19 594
Non-controlling interest		-1 799	-1 084
Total profit/loss for the year		-77 326	-20 678
Total comprehensive income/cost for the year attributable to:
Shareholders of Anoto Group AB		-74 342	-19 519
Non-controlling interest		-1 935	-1 065
Total comprehensive income/cost for the year		-76 277	-20 584
Earnings per share before and after dilution (SEK) 1) 2)		-0,60	-0,16
Earnings per share on total comprehensive income/cost before and after dilution (SEK) 1) 2)		-0,59	-0,16
Weighted average number of shares		128 583 867	128 583 867
Weighted average number of shares after dilution 3)		128 583 867	128 583 867

1) Profi/Loss for the year attributable to shareholders of Anoto Group AB divided by the average number of shares during the year.

2) Profit/Loss for the year attributable to shareholders of Anoto Group AB divided by the sum of the weighted average number of shares during the year and the weighted average number of outstanding warrants whose exercise price was less than the closing share price for the year. Warrants give rise to a dilutive effect only when their conversion to shares generates poorer earnings per share (IAS 33, Earnings per share). There were no outstanding warrants at the year end 2010.

3) Only warrants whose exercise price is less than the closing price for the year are included.

STATEMENT OF FINANCIAL POSITION

			Group
(SEK Thousand)	Note	2010-12-31	2009-12-31
ASSETS
Non-current assets
Intangible fixed assets
Capitalized development expenditures	19	3 060	26 450
Patents	20	22 221	26 163
Goodwill	23	298 674	298 674
Brands	21	762	607
Other intangible assets	22	3 897	8 165
Total intangible fixed assets		328 614	360 059
Property, plant and equipment
Equipment and tools	24	8 943	9 184
Total property, plant and equipment		8 943	9 184
Financial fixed assets
Other long-term securities	26, 27	373	872
Other long-term receivables	28	1 768	1 963
Total financial fixed assets		2 141	2 835
Total non-current assets		339 698	372 078
Current assets
Inventory
Finished goods and goods for sale		25 306	29 356
Current receivables
Accounts receivable	29	19 139	45 013
Other receivables		9 102	21 258
Prepaid expenses and accrued income	30	5 501	6 428
Total current receivables		33 742	72 699
Liquid assets		81 044	80 770
Total current assets		140 092	182 825
TOT AL ASSETS		479 790	554 903

(SEK Thousand) Note 2010-12-31 2009-12-31 SHAREHOLDERS´ EQUITY AND LIABILITIES Shareholders´ equity 39 Share capital 2 572 2 572 Other capital contributed 448 508 448 508 Other reserves 1 108 -77 Profit brought forward and Profit/loss for the year -57 425 18 102 Equity attributable to the shareholders of Anoto Group AB 394 763 469 105 Non-controlling interest -3 160 -1 225 Long-term liabilities/Provisions Advance payments from customers 19 806 31 007 Total long-term liabilities/provisions 19 806 31 007
Current liabilities
Provisions for product warranties 31 829 706
Accounts payable 15 562 18 767
Advance payments from customers 19 150 11 853
Other liabilities 7 384 4 344
Accrued expenses and deferred income 32 25 456 20 346
Total current liabilities 68 381 56 016
TOT AL SHAREHOLDERS´ EQUITY AND LIABILITIES 479 790 554 903
Pledged assets 35 30 933 12 591
Contingent liabilities 36 2 002 888

STATEMENT OF CASH FLOWs

			Group
(SEK Thousand)	Note	2010	2009
OPER ATING ACTIVITIES	40
Profit after financial items		-77 272	-20 935
Change in provisions		123	-94
Depreciation and amortization on assets	14, 19-24	15 924	14 454
Impairment losses of fixed assets	14, 19-24	33 701	1 044
Cost for options		-	150
Tax paid	18	-54	-
Cash flow from operating activities before change in working capital		-27 578	-5 381
Cash flow from change in working capital
Change in operating receivables		37 302	-261
Change in inventory		4 226	7 973
Change in operating liabilities		1 358	-25 353
Total change in working capital		42 886	-17 641
Cash flow from operating activities		15 308	-23 022
Investing activities
Capitalized development expenditures	19	-7 943	-4 430
Patents	20	-4 096	-4 082
Brands	21	-252	-338
Equipment and tools	24	-2 743	-5 899
Shares in group companies		-	-184
Cash flow from investing activities		-15 034	-14 933
Total cash flow before financing activities		274	-37 955
Financing activities
Change in long-term receivables		-	19 381
Cash flow from financing activities		-	19 381
Cash flow for the year		274	-18 574
Liquid assets at beginning of the year		80 770	99 344
Liquid assets at end of the year		81 044	80 770

.

STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY

				Profit brought	Shareholders´ equity contributable
				forward	to the	Non	Total
		Other capital	Translation	incl. profit	shareholders of	controlling	shareholders´
(SEK Thousand)	Share capital	contributed 1)	reserve 2)	for the year	Anoto Group AB	interest	equity
GROUP EQUITY
Shareholders´ equity January 1, 2009	2 572	448 508	-152	37 546	488 474	-160	488 314
Total profit/loss for the year	-	-	-	-19 594	-19 594	-1 084	-20 678
Other comprehensive income/cost	-	-	75	0	75	19	94
Total comprehensive income/cost for
the year	0	0	75	-19 594	-19 519	-1 065	-20 584
Adjustment costs for options	0	-	0	150	150	0	150
Shareholders´ equity December 31, 2009	2 572	448 508	-77	18 102	469 105	-1 225	467 880
Total profit/loss for the year	-	-	-	-75 527	-75 527	-1 799	-77 326
Other comprehensive income/cost	-	-	1 185	-	1 185	-136	1 049
Total comprehensive income/cost for
the year	0	0	1 185	-75 527	-74 342	-1 935	-76 277
Shareholders´ equity December 31, 2010	2 572	448 508	1 108	-57 425	394 763	-3 160	391 603

1) Includes parent company statutory reserve and premium reserve from share issues. For changes in these items references are made to Changes in parent company equity.

2) From translation of Financial reporting from foreign subsidiaries.

INCOME STATEMENT

			Parent Company
(SEK Thousand)	Note	2010	2009
Net sales	5	4 509	9 126
Cost of goods and services sold	11	-	-
Gross profit/loss		4 509	9 126
Selling expenses	8,9,14,33,34	-	-
Administrative expenses	8,10,14,33,34	-4 106	-723
Research & development costs	8,14,34	-	-
Other operating income	12	4	120
Other operating costs	13	-	-7 361
Operating profit/loss	11	407	1 162
Profit/loss on shares in group companies	15	-46 000	-
Interest and similar income	17	3	10
Interest and similar expenses	17	-	-5
Profit/loss before taxes		-45 590	1 167
Taxes	18	-	-
Profit/loss for the year		-45 590	1 167

Statement of comprehensive income

(SEK Thousand)	Note	2010	2009
Profit/loss for the year		-45 590	1 167
Other comprehensive income/cost		-	-
Total comprehensive income/cost		-45 590	1 167

BALANCE SHEET

			Parent Company
(SEK Thousand)	Note	2010-12-31	2009-12-31
ASSETS
Non-current assets
Intangible fixed assets
Patents	20	463	577
Brands	21	44	51
Total intangible fixed assets		507	628
Property, plant and equipment
Equipment and tools	24	49	113
Total property, plant and equipment		49	113
Financial fixed assets
Shares in group companies	25	267 194	267 194
Receivables - group companies		77 505	77 505
Total financial fixed assets		344 699	344 699
Total non-current assets		345 255	345 440
Current assets
Receivables from subsidiaries		62 215	106 637
Other receivables		3	1 480
Prepaid expenses and accrued income	30	155	103
Total current receivables		62 373	108 220
Liquid assets		1 042	1 286
Total current assets		63 415	109 506
TOT AL ASSETS		408 670	454 946
SHAREHOLDERS´ EQUITY AND LIABILITIES
Shareholders´ equity	39
Restricted equity
Share capital		2 572	2 572
Statutory reserve		419 610	419 610
Total restricted equity		422 182	422 182
Non restricted equity
Share premium reserve		28 555	28 555
Profit brought forward		2 115	948
Profit/loss for the year		-45 590	1 167
Total non restricted equity		-14 920	30 670
Equity attributable to the shareholders of Anoto Group AB		407 262	452 852
Current liabilities
Accounts payable		22	17
Other liabilities		363	235
Accrued expenses and prepaid income	32	1 023	1 842
Total current liabilities		1 408	2 094
TOT AL SHAREHOLDERS´ EQUITY AND LIABILITIES		408 670	454 946
Pledged assets	35	-	-
Contingent liabilities	36	-	-

CASH FLOW STATEMENT

			Parent Company
(SEK Thousand)	Note	2010	2009
OPER ATING ACTIVITIES	40
Profit after financial items		-45 590	1 167
Depreciation and amortization on assets	14, 19-24	189	240
Impairment of shares in group companies	15	46 000	-
Cash flow from operating activities before change in working capital		599	1 407
Cash flow from change in working capital
Change in operating receivables		45 847	11 092
Change in operating liabilities		-46 686	-12 196
Total change in working capital		-839	-1 104
Cash flow from operating activities		-240	303
Investing activities
Patents	20	-4	-19
Brands	21	-	-22
Equipment and tools	24	-	127
Cash flow from investing activities		-4	86
Total cash flow before financing activities		-244	389
Cash flow from financing activities		0	0
Cash flow for the year		-244	389
Liquid assets at the beginning of the year		1 286	897
Liquid assets at the end of the year		1 042	1 286

CHANGES IN SHAREHOLDERS´ EQUITY

					Profit brought
			Total		forward incl	Total
		Statutory	Restricted	Share premium	profit for the	unrestricted	Total
(SEK Thousand)	Share capital	reserve	equity	reserve	year	equity	equity
PARENT COMPANY'S EQUITY
Shareholders´ equity January 1, 2009	2 572	419 610	422 182	28 555	948	29 503	451 685
Profit/loss for the year	-	-	0	-	1 167	1 167	1 167
Other comprehensive income/cost	-	-	0	-	0	0	0
Total comprehensive income/cost for
the year	0	0	0	0	1 167	1 167	1 167
Shareholders´ equity December 31, 2009	2 572	419 610	422 182	28 555	2 115	30 670	452 852
Profit/loss for the year	-	-	0	-	-45 590	-45 590	-45 590
Other comprehensive income/cost	-	-	0	-	0	0	0
Total comprehensive income/cost for
the year	0	0	0	0	-45 590	-45 590	-45 590
Shareholders´ equity December 31, 2010	2 572	419 610	422 182	28 555	-43 475	-14 920	407 262

The change in number of shares and their par value, see below.

All shares are fully paid and entitles the holder to an equal percentage of dividend.

	Increase in		Par value/
	no. of shares	No. of shares	share
Registered opening balance January 1, 2009		128 583 867	SEK 0,02
Registered closing balance December 31, 2009		128 583 867	SEK 0,02

	Increase in
	no. of shares	No. of shares	share
Registered opening balance January 1, 2010		128 583 867	SEK 0,02
Registered closing balance December 31, 2010		128 583 867	SEK 0,02

Notes (SEK thousand unless otherwise indicated)

Note 1 | General accounting policies

The consolidated accounts of Anoto Group AB (publ.) (Anoto) have been prepared in compliance with the Swedish Annual Accounts Act, International Financial Accounting Standards (IFRS), interpretations from International Financial Reporting Committee (IFRIC) as accepted by EU and the Swedish Financial Reporting Board recommendation RFR 1 "Complementary accounting standards for group accounting".

The parent company's annual accounts have been prepared in compliance with the Swedish Annual Accounts Act (ÅRL) and the Swedish Financial Reporting Board recommendation RFR 2, "Accounting for legal entities". In addition, Swedish Financial Reporting Board statements appli-

Note 2 | Anoto's accounting policies

THE GROUP

Other than the revaluation of certain financial instruments, assets and liabilities are based on historical cost.

The parent company´s functional currency, Swedish kronor (SEK), is also the reporting currency for the Group.

Below is a summary of the accounting principles used by the Group. The accounting principles have, with the exceptions described, been applied consequently to all periods presented, in the Group´s financial reports. The Group accounting policies have been applied accordingly by all Group companies.

Consolidated accounts

The consolidated accounts cover Anoto Group AB (publ.), the parent company, and the companies in which the parent company has a controlling interest. Controlling interest means the direct or indirect right to outline a company´s financial and operational strategies in order to achieve economic benefits.

Acquisitions as from January 1, 2010

The consolidated accounts have been prepared in accordance with the purchase method. The historical cost is the sum of the fair values of assets paid, accrued or overtaken liabilities, as well as for the equity instruments that Anoto has issued in exchange for the controlling interest in the acquired unit. Transaction costs that arise, with the exemption of transaction costs arising from issues of equity instruments or debt instruments, are recognized directly in profit or loss for the year.

The historical cost is allocated among the unit's identifiable assets, contingent and other liabilities that meet the criteria for accounting in accordance with IFRS 3, Business Combinations, reported at fair value. If the historical cost exceeds net acquired assets and liabilities in accordance with the above, the difference is reported as goodwill. When the difference is negative, a so called bargain purchase, this is recognized directly in profit or loss for the year.

Transferred consideration in connection with the acquisition does not include payments that applies to settlement of previous business relations. This type of settlement is recognized in profit or loss.

Contingent payments are reported at fair value on the acquisition date. In cases where a contingent payment is classified as an equity instrument, no revaluation is done, and settlement is done in equity. Other contingent payments are revalued at every reporting date, and the change is recognized in profit or loss for the year.

In companies that are not wholly owned subsidiaries, non-controlling interests are recognized. There are two alternative ways for reporting noncontrolling interests, either as the proportionate share of net assets or at fair value meaning that goodwill is included in the non-controlling interest. The choice of method can be made individually for each acquisition.

cable for listed companies are observed. The consolidated and annual accounts, which are specified in thousands of Swedish kronor (SEK Thousand), refer to January 1 - December 31 for income statement items and December 31 for balance sheet items.

The annual report and consolidated accounts have been approved for distribution by the Board and the CEO on April 6, 2011. The Group´s statement of comprehensive income and statement of financial position, and the parent company´s income statement and balance sheet, will be subject to approval by the Annual General Meeting on May 12, 2011.

Acquisitions made between January 1, 2004 and December 31, 2009 Acquisitions made between January 1, 2004 and December 31, 2009 and when the historical cost exceeds the fair value of assets paid and overtaken liabilities as well as contingent liabilities, which are recognized separately, the difference is reported as goodwill. When the difference is negative, this is recognized directly in profit or loss for the year. Transaction costs, with the exemption of transaction costs arising from issues of equity instruments or debt instruments, have been capitalized as part of the acquisition.

Acquisitions made before January 1, 2004 (date of first-time adoption of IFRS) On acquisitions made before January 1, 2004 goodwill has, after impairment testing, been reported to a historical cost equivalent to recognized value according to previous accounting policies. The classification and the handling in the accounts of the acquisitions made before January 1, 2004 has not been reviewed in accordance with IFRS 3 when preparing the opening balance of the Group according to IFRS on January 1, 2004.

Elimination of intra-Group transactions

All intra-Group transactions are eliminated in the consolidated accounts. Intra-Group transactions include internal sales, profits and balances, as well as shareholders' contributions to Group companies and impairment losses on participations in Group companies.

Transactions in foreign currencies

A functional currency is assigned to each foreign subsidiary. The functional currency is the currency of the primary economic environment in which the companies carry out their business.

Monetary assets and liabilities in foreign currencies are translated to the functional currency to the exchange rate in effect on the balance sheet date. Exchange rate differences arising from translation are recognized against profit or loss for the year. Non-monetary assets and liabilities recognized at historical costs are translated at the exchange rate at the time of the transaction. Nonmonetary assets and liabilities recognized at fair values are translated at the functional currency to the exchange rate applicable at the time of valuation to fair value.

The financial reports of the foreign subsidiaries that have a different functional currency than Anoto's functional currency (the Swedish krona) are recalculated at the exchange rate on the balance sheet date for all balance sheet items and at the average exchange rate for all items included in the result.

The translation differences that arise stem from the difference between the average exchange rates in the income statement and the exchange rates

			Average exchange rate		On balance sheet date
Country	Currency	2010	2009	2010	2009
United States	USD	7,205	7,646	6,803	7,213
Japan	JPY (100)	8,221	8,178	8,345	7,845

on the balance sheet date, as well as the translation of net assets at a different exchange rate as of year-end than as of the beginning of the year. Translation differences are reported separately in the statement of comprehensive income as translation differences for the period and are accumulated in the equity as translation reserve. In not wholly-owned subsidiaries the translation differences are allocated to the non-controlling interests according to their proportional share of ownership.

Exchange rates

For information about the exchange rates used at recalculation of foreign subsidiaries, see table page 32.

Revenue recognition

Revenue is received from product sales, licenses, royalties and development projects. Revenue from product sales is recognized when essentially all risks and rights associated with ownership have been transferred to the purchaser, normally at the time of delivery.

Revenue from non fixed-term licenses is directly reported as of the invoice date.

For instance, license revenue may involve a certain degree of exclusivity or contributions for, or access to, a platform.

Royalties are reported during the same month as the partner makes the actual sale.

Revenue attributable to development projects, Non Refundable Engineering (NRE), is recognized in the same period as the service is rendered. The extent to which each development project has been completed is normally based on a quarterly analysis. The project's estimates are updated with the costs until the current date in order to determine the percentage of the total estimated costs that have accrued. An anticipated loss on a project is reported immediately as a cost.

Intangible assets

Goodwill

Goodwill, which is reported in connection with the acquisition of subsidiaries in accordance with the above, is initially reported as an asset at historical cost. As described in note 23 the Group has no independent cash-generating units and the Group as a whole is viewed as a cash-generating unit, thus there has been no split of the goodwill amount. Goodwill is not amortized but subject to an impairment test annually or whenever needed by calculating the recoverable amount of the corresponding cash-generating unit. The recoverable amount is defined as the asset's net realisable value or value in use, whichever is higher. The impairment test allocates goodwill among the cash-generating units that are expected to benefit from acquisition synergies. An impairment loss is recognized if the the value of the unit reported by the Group exceeds the recoverable amount. The impairment loss is charged to earnings for the year.

Regarding goodwill acquired before January 1, 2004 : The Group has at the transition to IFRS not adopted IFRS retrospectively as per the transition date. Reported net book value thus equals net book value as per January 1, 2004 having considered periodic impairment testing.

Research and development

Expenses for research related to acquiring new scientific or technical knowledge are expensed immediately as they occur. Expenses for development, where the results from research or other knowledge are applied to achieve new or improved products, are reported as an asset in the statement of financial position if the product is technically or commercially useful and if the company has sufficient resources to complete the development and thereafter use or market the immaterial asset. The reported value includes all directly attributable expenses, such as material and services, payroll and registration of legal rights. Other expenses related to development are expensed directly as they occur. In the statement of the financial position development expenses are reported at actual cost less accumulated amortization and write-downs.

Other intangible assets

Other intangible assets acquired by the Group mainly relates to patents, brands and licenses and are reported at acquisition cost less accumulated amortizations and write-downs.

Tangible fixed assets

Property, plant and equipment consisting of equipment, computer equipment and computer programs is reported at accumulated depreciation according to plan and any impairment losses. Acquisition cost includes purchase price and

expenses directly attributable to the bringing of the asset to its use as intended with the acquisition. Other expenses are added to the acquisition cost only if it is probable that such expenses will lead to future economic benefits and if such expenses can be calculated properly. Other related costs are reported as expenses as they occur.

Depreciation and amortization according to plan

Depreciation and amortization according to plan are based on the historical costs and are done on a straight-line basis over the estimated economic useful lives of the assets in view of the following depreciation and amortization periods:

– Patents		10 years
	– Capitalized development expenditures	3 years
– Brands		10 years
	– Equipment	5 years

– Capital expendture on rented assets 5 years

The depreciation and amortization methods used, residual values and useful life of assets are reassessed at the end of each year.

Impairment losses

Write-down of tangible and intangible fixed assets

If there is an indication that a Group asset has decreased in value, its recoverable amount is determined. The recoverable amount is defined as the asset's net realisable value or value in use, whichever is higher. When determining the value in use, the present value of the future cash flows that the asset is expected to give rise to during its useful life is estimated. An impairment loss is recognized if the Group's reported value exceeds the recoverable amount, and the impairment loss is charged to earnings for the year.

Write-down of financial assets

At the time of each reporting the company evaluates the existence of objective evidence of an impairment in financial assets, such as identifiable occurances having a negative effect on the possibilities to regain the acquisition cost.

Leases

Lease contracts are classified as either financial or operational leases. In a financial lease, the financial risks and benefits related to ownership are essentially transferred to the leasee. If that is not the case, it is an operational lease. The Anoto Group has no significant financial lease contracts. Cost for operational leases are distributed evenly over the lease period.

Profit per share

The calculation of profit per share is based on the annual result in the Group attributable to the shareholders of the parent company and the weighted average of outstanding shares during the year. When calculating the profit per share after dilution the result and the average number of shares are adjusted in order to consider potential dilution from preference shares, which during the reporting periods relates to options granted to employees. The dilution from options affects the number of shares and occurs only when the strike price is below market price.

Receivables and liabilities in foreign currencies

Receivables and liabilities in foreign currencies are reported at the exchange rate on the balance sheet date, and unrealised exchange gains and losses are included in earnings. Exchange gains/losses on operating receivables and liabilities are reported as other operating income/expenses. Exchange rate differences on financial receivables and liabilities are reported as financial items.

Financial instruments

The Group's financial instruments consist mostly of accounts receivable, liquid assets, accounts payable and financial derivative instruments in the form of currency forward contracts.

Reporting of and derecognition from the statement of financial position A financial asset or liability is reported in the statement of financial position when the company becomes party to the contractual terms and conditions of the instrument. Accounts receivable are recorded in the statement of financial position when an invoice has been sent. A liability is recorded when the counterparty has delivered a product or service and a contractual obligation to pay exists, even if an invoice has not yet been received. Accounts payable are recorded when an invoice has been received.

A financial asset is derecognized from the statement of financial position when the rights to the agreement are realized, expired or when the company loses control over them. The same applies to portions of financial assets. A financial liability is derecognized from the statement of financial position when the obligation in the agreement is fulfilled or become extinguished in some other way. The same applies for part of a financial liability.

A financial asset and a financial liability are offset and the net amount is recognized in the statement of financial position only when the company has a legal right to set off the amounts and intends either to settle the net amounts or at the same time realize the receivable and settle the liability.

Acquisition or divestment of financial assets are reported on the transaction day. The transaction day is the date on which the company commits to acquire or divest the asset.

Classification and valuation

Financial instruments, except for derivative instruments, are initially stated at cost, corresponding to the instrument´s fair value. Transaction costs are added to this for all financial instruments except for those belonging to the financial assets category, which are reported in the income statement at fair value. The classification of a financial instrument on the initial reporting depends on the intention of the acquirer. The classification decides how the financial instrument is valuated on the initial reporting date as described below.

Derivative instruments are reported initially at their fair value meaning that transaction costs are charged against profit or loss for the period. After the initial recognition, derivative instruments are reported as described below.

Liquid assets

Liquid assets consist of cash and bank balances, as well as current investments. A current investment is classified as a liquid asset if it can easily be converted to cash at a known amount and it is exposed to only a negligible risk of value fluctuations.

Loan receivables and accounts receivable

Loan receivables and accounts receivable are monetary assets which are not derivatives, that have defined payment plans or identifiable payments and which are not listed on an active market place. These assets are valued at historical cost. Accounts receivable are reported net after deduction of doubtful accounts receivable.

Financial assets/liabilities valued at actual cost through result

This category consists of two subgroups: Financial assets/liabilities held for trade and other financial assets/liabilities which the Group has chosen to report in this category. A financial asset is classified as held for trade if acquired with the intention to sell at short term. Derivatives are classified as held for trade. Assets/liabilities in this category are valued at market value and gains/losses are reported in the result. Derivatives held for trade by Anoto relate to securing of future (6 months) net cash flows in EUR, USD and JPY.

Unlisted shares

The company´s ownership of unlisted shares are valued at acquisition cost in accordance with the exception rule in IAS 39 related to equity instruments whose actual cost cannot be accurately determined.

Accounts payable

Accounts payable are reported at the amount the company plans to pay the supplier in order to liquidate the debt.

Currency forward contracts and hedge accounting

The Group uses currency forward contracts to hedge the net flow of foreign currencies up to 12 months. The size of each contract is based on rolling liquidity forecasts for following periods. The Group continually orders contracts in line with received payments in foreign currencies. The primary purpose of hedging is to shield the Group from major changes in cross rates. Hedging does not meet the criteria of IAS 39, "Financial Instruments: Disclosure and Presentation", for hedge accounting. Thus, changes in the value of all currency forward contracts are reported in the result as other operating income/expense.

Inventory

Inventory, consisting of finished products and critical components, is reported at historical cost (in accordance with FIFO) or net realisable value, whichever is lower. The cost of inventories includes costs incurred to acquire inventory assets and transport them to their current site and condition.

Pensions and compensations to employees

All pension plans in the Group are classified as defined contribution pension plans, as Anotos´s obligation is limited to the contributions that the company has undertaken to pay. In those cases, the size of an employee´s pension depends on the contributions the company pays into a fund or to an insurance company and the capital return on those contributions. Consequently it is the employee who takes the actuarial risk (that the benefit becomes less than expected) and the investment risk (that the invested assets will be insufficient to support the expected benefit). The company´s commitments concerning service costs paid to defined contribution pension plans are charged against profit in pace with employees´performance of their service for the company during a period.

As part of incentive programmes, the Group has issued stock options and warrants to employees. The fair value of employee stock options on the distribution date are reported as a cost in the income statement. The fair value is calculated in accordance with the Black-Scholes Model. The total costs are allocated during the period in which the options are earned. The cost is reported under administrative expenses. Social security expenses related to share based instruments to employees as remuneration for services are allocated during the periods in which the services are provided. The provision for social security is based on market value of the shares at the time of the reporting. Market value is calculated using the same valuation model as was used at the time granting the options.

Short-term compensation paid to employees is calculated without discounting and is reported as an expense when the related services were received. A provision for estimated bonus payment is reported when the Group has a legal or constructive obligation to make such payments due to the fact that the services in question have been received from the employees and the provision amount can be estimated in a reliable manner.

A provision is recognized in conjunction with termination of employees only if the company is unquestionably obligated to terminate an employee prior to the normal date. When compensation is offered to encourage voluntary departures, an expense and provision are booked if it is likely that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.

Taxes

All tax deemed payable on reported earnings is reported in the annual result. The tax has been calculated in accordance with each country's tax regulations and included in the tax on profit/loss for the year item.

The Group's total tax in the statement of comprehensive income consists of current tax on taxable earnings for the period and deferred tax. The Group's tax consists primarily of current tax on taxable earnings of foreign subsidiaries for the period.

The Group uses the balance sheet method to calculate deferred tax assets and liabilities. In accordance with the balance sheet method, the calculation is based on tax rates as of the balance sheet date as applied to temporary differences between the reported and tax value of an asset or liability, as well as tax loss carry-forwards. Deferred tax assets are reported in the statement of financial position only in amounts that can presumably be utilized within the foreseeable future.

Temporary differences are not taken into consideration in consolidated goodwill or in difference attributed to initial recognition of assets and liabilities not classified as acquisitions of business operations that, at the time of transaction, did not affect either net profit or taxable profit.

Reporting cash flow

The cash flow statements are prepared in accordance with the indirect method, i.e., profit/loss after financial items is adjusted for transactions that have not given rise to payments or disbursements during the period, as well as for any income and expenses attributable to the cash flow of investing activities.

Provisions

A provision is reported when there is a commitment as the result of an event, and it is probable that an outflow of resources will be required to settle the commitment and an amount can be reliably estimated. The following provisions are reported in the statement of financial position: Product warranties.

Provisions for product warranty commitments relate to the sale of pens. The warranty time period is 12 months and the provision is classified as short-term. As there is not yet any reliable history concerning the number of warranty issues, the provision is calculated with regard to the expected outcome during the existing warranty time period.

Contingent liabilities

Contingent liabilities are reported if there is a possible commitment that is confirmed only by multiple uncertain future events and it is unlikely that an outflow of resources will be required or that the size of the commitment will not be calculable with sufficient precision.

Disclosures about related parties

For disclosures about the company's transactions with related parties, refer to Note 9 "Remuneration for senior executives" and Note 38 "Related party transactions". There were no other transactions with related parties.

Segment reporting

The evaluation of the Group results is based on three application areas for which actual Net sales and Gross profit are disclosed. The application areas utilize common resources with regards to development and administration and a split of costs below Gross profit would be possible only if based on rough estimates. The same applies also to the Group assets & liabilities. Evaluation of Group expenses is applied to the Group as a whole and there is no independent financial information available to the fields of application. The Group has consequently not identified any operating segments.

Changed accounting principles

Below is a summary of changed accounting policies adopted by Anoto from January 1, 2010. Other IFRS changes have been judged not to have any material impact on Group accounts.

IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements

The amendments mean that losses attributable to minority interest shall be recognized even if this results in a deficit balance of the minority interest, that transactions related to the minority in which controlling influence is maintained shall be recognized in equity, and that the profit/loss that arises when a controlling influence ceases shall be recognized in profit or loss for the period, including remeasurement of any remaining interest at fair value. Minority interest has been renamed to non-controlling interest in the financial statements.

Furthermore, the amendments entail a changed definition of business, transaction costs must be expensed in the income statement as they arise and may not be capitalized as part of the acquisition. The changes also entail that there are two alternative ways for reporting non-controlling interests, at fair value, i.e., that goodwill is included in the non-controlling interests or, alternatively, that non-controlling interests consist of the share of net assets. The choice between the methods can be made individually for each acquisition. Contingent payments are recorded at fair value at the acquisition date and changes in contingent payments classified as liabilities shall subsequently be remeasured through profit or loss instead of adjustments in relation to goodwill.

The above mentioned principles have not had any retrospective effect on the company´s financial statements, which thus entails that no amounts in the financial statements have been adjusted.

New IFRS and interpretaions valid from 2011 (not yet in force)

A number of new or amended IFRS accounting policies take effect in 2011 and have not been applied in the preparation of these financial statements.

Amendments to IAS 24 (Related Party Disclosures), IAS 32 (Financial Instruments: Presentation), IFRS 7 (Financial Instruments: Disclosures), IFRIC 14 (IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction) plus IFRIC 19 (Extinguishing Financial Liabilities with Equity) are expected not to have any impact on Group accounts.

IFRS 9 (Financial Instruments) is supposed to replace IAS 39 (Financial Instruments: Recognition and Measurement) in 2013 at the latest. The first part of the standard will change the measurement categories for the financial assets, and the existing categories will be replaced by two categories, one for assets measured at fair value and one for assets measured at amortised cost. The amendment is not expected to have any significant impact on the accounting of the Group´s financial assets.

PARENT COMPANY

The parent company's annual accounts have been prepared in compliance with the Swedish Annual Accounts Act (ÅRL) and the Swedish Financial Reporting Board recommendation RFR 2, "Accounting for Legal Entities". In addition, Swedish Financial Reporting Board statements applicable for listed companies

are observed. Application of RFR 2 entails that the parent company, in the annual report for the legal entity, shall comply with all EU-endorsed IFRSs and pronouncements as far as possible within the framework of the Annual Accounts Act, the Pension Obligations Vesting Act, and taking into account the connection between reporting and taxation. The recommendation indicates which exceptions from and amendments to IFRS are to be made.

For details of the parent company's accounting policies, refer to the Group's accounting policies above. The section below is limited to the parent company's deviations from the Group's policies. Unless indicated otherwise, the parent company´s accounting policies have changed during 2010 in accordance with what has been indicated above for the Group.

Classification and presentation format

An income statement and a comprehensive statement of income are presented for the parent company, whereas for the Group these two financial statements form one comprehensive statement of income. In addition, for the parent company the titles balance sheet and cash flow are used for the financial statements which in the Group are titled statement of financial position and statement of cash flows, respectively. The income statement and balance sheet of the parent company are presented in accordance with the format prescribed in the Annual Accounts Act, whereas the statement of comprehensive income, 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. The differences in the parent company´s income statement and balance sheet compared with the Group´s financial statements consist mainly of the reporting of financial income and costs and the reporting of equity.

Leases

The parent company's financial lease contracts are reported as operational lease contracts.

Financial instruments

The parent company does not apply the presentation rules of IAS 39. The parent company reports financial fixed assets at historical cost less any impairment losses and financial current assets at the lower of cost or net realisable value.

Holdings in subsidiaries and associated companies

Holdings in Group and associated companies are reported at historical cost. If the reported value of the investment exceeds the recoverable amount (refer to section above on impairment losses), an impairment loss is recognized.

The changed accounting policies for IFRS 3 Business combinations (Revised) and the amendments to IAS 27 Consolidated and separate Financial Statements, which are applied by the Group, do not give rise to the same changes in accounting policies for the parent company with respect to transaction costs and contingent payments. Transaction costs are included in the reported cost for the subsidiary. Contingent payments are measured according to the probability that the payment will be made. Any changes in the provision/ receivable is added to/reduces the reported cost. Acquisition at a low price corresponding to future expected losses and costs is dissolved during the expected periods the losses and costs arise. Acquisition at a low price arising from other reasons is recognized as provision except for the share that exceeds fair value on acquired identifiable non-monetary assets. The share that exceeds this value is taken up as an income immediately. The part that does not exceed the fair value on acquired identifiable non-monetary assets is taken up as an income in a systematic way over a period that is calculated as the remaining weighted average useful life of the acquired identified assets and which can be depreciated.

Shareholders' contributions

The company reports Group contributions and shareholders´contributions in accordance with pronouncement UFR 2 issued by the Swedish Financial Reporting Board. Shareholder´s contributions are applied directly to shareholders´ equity by the receiver and capitalized in the shares and participations by the giver to the extent impairment is not required. Group contributions are reported based on their economic significance.

Note 3 | Assessments when applying the Group's accounting policies and the main sources of uncertain estimates

Critical assessments when applying the company's accounting policies

When applying the Group's accounting policies (as described in Note 2), management has made the following assessments that have the most significant impact on the amounts that appear in the financial reports.

Key sources of uncertainty in the estimates

The information below concerns key assumptions about the future and other key sources of uncertainty in the estimates on the balance sheet date that entail significant risk of substantial adjustments to reported assets/liabilities for the next financial year.

Impairment tests for goodwill

When testing for impairment losses, the value in use is calculated for the cashgenerating unit to which goodwill has been allocated. The value in use is based on the estimated future cash flows that the cash-generating unit is expected to give rise to. The reported value for goodwill is SEK 299 million as of the balance sheet date. For additional information about impairment losses, refer to Note 23.

Impairment tests for capitalized development expenditures

When testing for impairment losses, the value in use is calculated for the technology and products developed by the company. The value in use is based upon the estimated future cash flows that the technology and products are expected to generate.

Note 4 | Risk management by the Group

The Anoto Board of Directors has adopted a financial policy for:

• Simplifying and harmonizing the Group's financial activities
• Defining rules for the financial risks that are accepted by the Board
• Adopting guidelines for the Group to operate independently
• Delegating management of financial risks to the CFO

The areas of the financial policy that most affect Anoto's management of risks are liquidity and currency.

Liquidity policy

In accordance with the Finance policy of the Group the cash need of the Group is continuously updated. These cash flow analyses give information about cash planning, deposits, interest periods etc. In accordance with the liquidity policy, available cash shall consist of cash and negotiable securities with an official credit rating equivalent to Moodys P1.

Liquidity and financing risk

Anoto´s liquid assets, as cash and bank deposits, amounted at the end of 2010 to MSEK 81 (81).The Group has neither any interest bearing liabilities nor pledged accounts receivables, inventory or fixed assets. The Board of Anoto foresees that the operations during 2011 can be financed by existing liquid assets without any borrowings from banks or other credit institutes. There are no credit promises or liquidity reserve, e.g. overdraft facilities.

The only financial liabilities that will affect the cash flow are accounts payable and other current liabilities. All these liabilities fall due within 3 months.

Currency exposure and currency policy

Transaction exposure

Transaction exposure arises when income and expenses are in different currencies. Anoto has large exposure to the USD, EURO and JPY, because most of its invoicing is in those currencies.

In accordance with its 2010 currency policy, Anoto hedge its estimated currency exposure in these currencies over the next six months period by means of currency forward contracts.

The surplus in EUR depends on the Group´s invoicing in mostly EUR on the European market and on almost no costs in this currency. The net exposure in EUR is expected to remain high and this risk is managed through forward contracts equivalent to the expected net flow for the next six month period.

The Group´s increasing net exposure in USD compared to 2009 depends on increased invoicing in this currency. The costs in USD consist mostly of purchase of components as well as operating costs for the American subsidiary. The net exposure in USD is expected to increase somewhat during 2011 and this risk is managed through forward contracts equivalent to the net flow of USD for the next six month period.

The net exposure in JPY has increased during 2010, mainly because of increasing invoicing. The Group´s costs in JPY concerns the operation of the subsidiary in Japan. As a consequence of the restructuring in the end of 2010 the Group´s costs in JPY will diminish during 2011. The currency risk in JPY is managed through forward contracts equivalent to the net flow for the coming six month period.

Hedge accounting under IAS 39 does not apply.

Sensitivity analysis transaction exposure

The impact on profit/loss before tax of a five per cent change in exchange rates is:

USD/SEK	+/- 1.5 MSEK
EUR/SEK	+/- 1.9 MSEK
JPY/SEK	+/- 0.9 MSEK

Net flows by currency 2010 -120 -100 -80 -60 -40 -20 0 20 40

Actual net flows by currency 2010

Translation exposure

Hedging of translation exposure is determined by the Group finance policy. Currently no hedging of the translation exposure is undertaken, as the risk is limited. An annual analysis of the risk takes place in order to identify changes in exposure. The net assets in the subsidiaries in the US and Japan amount to MSEK -1 and MSEK -16, respectively.

Other risk areas

Other areas covered by the financial policy are:

• Interest rate risks; Anoto has no external borrowing, as the result of which there are no interest rate risks
• Guarantees and contingent liabilities

Other risk management Credit risk

The management of credit risks can be broken down into commercial risks and financial risks. The provisions set aside for bad debt losses as of the balance sheet date have not identified any commercial credit risks. For additional information about credit risk in accounts receivable, refer to Note 29. The financial credit risk is managed as part of the Group's finance policy, refer to Liquidity policy above.

Insurance risk

The Group's insurance coverage is reviewed annually with respect to traditional business insurance policies for property, liability, travel, etc. Anoto's insurance policy for patent disputes expired in 2005 and has not been renewable on reasonable terms. However, claims filed before the policy expired are still covered. The company plans to take out an insurance policy for patent disputes as soon as it can do so on reasonable commercial terms.

Patent risks, etc.

Anoto continually expands its patent portfolio by applying for patents on innovations linked to Anoto technology in order to supplement previous patent applications and patents granted. Anoto cannot guarantee that all patent applications will be approved or that our intellectual property rights will not be called into question, declared null and void or circumvented. Third parties have claimed, and may do so in the future as well, that Anoto infringes their intellectual property rights.

Defending Anoto against such assertions can be costly in terms of time, money and other resources. Legal disputes can compel Anoto to pay damages or other compensation, modify its products and technology or enter into license agreements. Anoto cannot guarantee that such licenses will be available at all or on reasonable terms.

Note 5 | Net sales

Group sales per market	Group
	2010	2009
Sweden	27 528	41 623
Rest of EU	33 335	57 662
USA	81 567	57 826
Japan	15 196	26 117
Rest of Asia	28 124	12 881
Rest of the world	22 645	9 753
Total	208 395	205 862

Group sales per product group

Group sales per product group	Group
	2010	2009
Royalty	30 088	18 563
NRE 1)	493	8 964
Licenses	34 387	48 948
Components	11 774	21 764
Pens	121 716	89 270
Other	9 937	18 353
Total	208 395	205 862

1) Revenues from software/hardware development of customer products

Group Net sales and Gross profit per application area		Net sales		Gross profit
	2010	2009	2010	2009
Anoto Products	115 868	127 043	78 401	86 720
Technology & Licensing	80 804	63 213	59 706	49 109
Other	11 723	15 606	1 985	6 643
Total	208 395	205 862	140 092	142 472

Anoto Group has generated revenues from one customer at a total of MSEK 33. These revenues have been recognized in the application area Technology & Licensing.

Net sales of the parent company only consist of inter-company invoicing of shared services.

Note 6 | Average number of employees

		2010		2009
	No. of employees	Whereof men	No. of employees	Whereof men
Parent company	0	0	0	0
Group companies:
Sweden	91	63	96	68
USA	7	4	8	5
Japan	10	8	9	6
Total	108	75	113	79

Note 7 | Board of Directors and management split by gender

		2010		2009
	No. of	Whereof men	No. of	Whereof men
Board of Directors Parent company	5	4	5	4
Management Parent company	-	-	-	-
Board of Directors Group companies	16	16	16	16
Management Group companies (Sweden)	5	5	6	5
Total	26	25	27	25

Note 8 | Salaries and remunerations

		Group		Parent Company
	2010	2009	2010	2009
Salaries
Board of Directors and CEO	4 030	3 991	1 100	1 602
(of which bonus etc.)	(-)	(-)	(-)	(-)
Other senior executives 1)	7 068	6 119	-	-
(of which bonus etc.)	(-)	(-)
Other employees Sweden	45 804	41 001	-	-
(of which bonus etc.)	(-)	(-)
Other employees USA	6 032	6 438	-	-
(of which bonus etc.)	(-)	(-)
Other employees Japan	9 104	7 055	-	-
(of which bonus etc.)	(-)	(-)
	72 038	64 604	1 100	1 602
Pay roll overhead
Board of Directors and CEO	2 824	1 567	346	471
Other senior executives 1)	2 579	2 234	-	-
Other employees Sweden	15 084	12 883	-	-
Other employees USA	1 126	1 139	-	-
Other employees Japan	947	745	-	-
	22 560	18 568	346	471
Pension expenses
Board of Directors and CEO	4 817	839	-	-
Other senior executives 1)	1 881	1 285	-	-
Other employees Sweden	11 770	9 602	-	-
Other employees USA	389	306	-	-
Other employees Japan	2 756	326	-	-
	21 613	12 358	0	0
Total salaries and remunerations	116 211	95 530	1 446	2 073
Whereof:
Sweden	95 857	79 521	1 446	2 073
Japan	7 547	7 883	-	-
USA	12 807	8 126	-	-
Total	116 211	95 530	1 446	2 073
Salaries and other remunerations are included in the statement of comprehensive income headlines as follows
Selling expenses	48 692	40 027	-	508
Administrative expenses	13 132	10 795	1 446	1 250
Research & development expenses	54 387	44 708	-	315
Total	116 211	95 530	1 446	2 073

1) The Group has 5 (6) senior executives.

The CEO is subject to a mutual period of notice of six months. He retains his salary and benefits during the period of notice. If the CEO's employment is terminated by the company in a manner that lacks an objective basis pursuant to Section 7 of the Security of Employment Act (1982:80), he is entitled to severance pay equivalent to 3 times the monthly salary in effect on the termination date.

The period of notice for other senior executives is six months, if the company terminates their employment, provided that the Security of Employment Act can be applied.

No agreements have been entered into for pension commitments or the equivalent for either Board members or senior executives above and beyond that which is covered by notes. Apart from a salary during the period of notice, no senior executive other than the CEO receives financial compensation. The CEO's and senior management employment contracts include a bonus based on terms adopted by the Board of Directors and limited to no more than 75 % of the fixed annual salary.

The retirement age for the CEO and other senior executives is 65. The pension premium is 35 % of the pensionable salary for the CEO and 15-19 % for other senior executives.

Guidelines for compensation to the Executives of the Company (Annual General meeting 2010)

The compensation level and structure shall be at market level. The total compensation shall be a balanced mix of fixed salaries, variable compensation, retirement and health plans, any other benefits and terms for dismissal and severance payments. The compensation may also comprise stock related long term incentive programmes.

The variable compensation varies for the respective Executive and shall primarily be related to Anoto´s result and operative goals and may at the most be 50 % of the fixed salary. However, the variable compensation for the CEO may be at most 75 % of the fixed salary.

The retirement plan shall be competitive. The CEO shall have a pension premium based retirement plan of 35 % of the fixed salary. The other Executives shall have pension premium based retirement plans corresponding to the (Swedish) ITP plan.

Other benefits, like health plans and company cars, shall be competitive.

Executives shall have a mutual notice period of six months. Under certain conditions, some Executives may have an additional three months notice period in case Anoto gives notice. The CEO shall have a mutual notice period of six months and a severance payment of twelve months salary in case Anoto terminates the employment without juste cause.

Note 9 | Remunerations to Board of Directors and CEO

BOARD OF DIRECTORS		Salaries/Remu		Pension	Other remu		Options awarded	Value of
AND CEO, 2010		nerations	Bonus	premiums	nerations	Total	for the year	options
Anders Norling 1)	CEO until July 8	1 994	-	4 582	-	6 576	-	-
Torgny Hellström	CEO from July 9	798	-	235	-	1 033	-	-
Jörgen Durban	Chairman of the Board	450	-	-	-	450	-	-
Stein Revelsby	Board member	175	-	-	-	175	-	-
Paddy Padmanabhan	Board member	175	-	-	-	175	-	-
Charlotta Falvin	Board member	175	-	-	-	175	-	-
Joonhee Won	Board member	175	-	-	-	175	-	-
Hans Otterling	Board member	88	-	-	-	88	-	-
Total 2)		4 030	0	4 817	0	8 847	0	0

1) Termination and severance payments have been converted in full to a pension premium.

2) Compensation to the Board members (Board fee) are paid from the parent company. Compensation to the CEO may originate from Group companies.

BOARD OF DIRECTORS		Salaries/Remu		Pension	Other remu		Options awarded	Value of
AND CEO, 2009		nerations	Bonus	premiums	nerations	Total	for the year	options
Anders Norling	CEO	2 541	-	839	300	3 680	-	-
Stein Revelsby	Board member	175	-	-	-	175	-	-
Leif Eriksrød	Board member	175	-	-	-	175	-	-
Charlotta Falvin	Board member	175	-	-	-	175	-	-
Håkan Ericsson	Board member	175	-	-	-	175	-	-
Hans Otterling	Chairman of the Board	450	-	-	-	450	-	-
Total 1)		3 691	0	839	300	4 830	0	0

1) Compensation to the Board members (Board fee) are paid from the parent company. Compensation to the CEO may originate from Group companies.

MANAGEMENT 2010	Salaries/ Remunerations	Bonus	Pension premiums	Other remunerations	Total	Options awarded for the year	Value of options
Group Management	7 068	-	1 881	-	8 949	-	-
Total	7 068	-	1 881	-	8 949	-	-
MANAGEMENT 2009	Salaries/ Remunerations	Bonus	Pension premiums	Other remunerations	Total	Options awarded for the year	Value of options
Group Management	6 119	-	1 285	-	7 404	-	-
Total	6 119	0	1 285	0	7 404	0	0

Compensation to Group management may originate from Group companies.

Note 10 | Audit fees

Audit fees are charged to earnings for the year by the company´s auditors, KPMG, as follows:
		Group		Parent Company
	2010	2009	2010	2009
Audit assignment	310	305	103	205
Audit activities in addition to the audit assignment	-	-	-	-
Tax advisory services	-	13	-	9
Other services	115	-	38	10
Total	425	318	141	224

An audit assignment involves examining the annual accounts and accounting records, as well as the management of the company by the Board of Directors and CEO, other tasks that the company's auditor is obligated to perform, and advisory services and other assistance occasioned by observations made during said examination or performance of said tasks. Audit activities in addition to the audit assignment involves reviews as certificates etc. By tax advisory is meant advisory services related to taxes, VAT and fees. Everything else is other services.

Note 11 | Operating costs by type

	Group			Parent Company
	2010	2009	2010	2009
Raw materials and supplies	-72 353	-71 363	-	-
Change in inventories	4 050	7 973	-	-
Personnel cost	-118 393	-95 530	-	-
Depreciation	-15 924	-14 454	-	-
Other external expenses	-54 154	-57 923	-	-
Total	-256 774	-231 297	0	0

Note 12 | Other operating income

	Group			Parent Company
	2010	2009	2010	2009
Result from trading in Financial instruments (derivatives)	2 310	4 542	-	-
Profit/loss on sale of fixed assets	-	120	-	120
Exchange gains	1 568	-	-	-
Other	849	1 319	4	-
Total	4727	5 981	4	120

Note 13 | Other operating cost

	Group		Parent Company
	2010	2009	2010	2009
Impairment of intangible assets	-30 823	-	-	-
Exchange losses	-	-1 394	-	-7 361
Total	-30 823	-1 394	0	-7 361

Note 14 | Depreciation and amortization

Depreciation of property, plant and equipment, and amortization of intangible fixed assets are included in the statement of comprehensive income and income statement as follows:

	Group			Parent Company
	2010	2009	2010	2009
Amortization intangible fixed assets
Selling expenses	-6 198	-5 439	-	-
Administrative expenses	-376	-	-125	-124
Research & development expenses	-6 338	-7 101	-	-
Total amortization intangible fixed assets	-12 912	-12 540	-125	-124
Depreciation tangible fixed assets
Selling expenses	-582	-638	-	-
Administrative expenses	-1 795	-443	-64	-116
Research & development expenses	-635	-833	-	-
Total depreciation tangible fixed assets	-3 012	-1 914	-64	-116
Total	-15 924	-14 454	-189	-240

Note 15 | Profit/loss on participations in group companies - Parent Company

	2010	2009
Impairment of shares in Anoto AB 1)	-46 000	-
Total	-46 000	0

1) Refers to write-down related to unconditional shareholders´contribution to the subsidiary Anoto AB. The shareholders´ contribution was made to cover the subsidiary´s loss for the year and to restore its equity to the level of share capital.

Note 16 | Financial income and expenses - Group

		Group
	2010	2009
Financial income
Interest on current investments	317	394
Interest income bank deposits	103	510
Other interest income	-	529
Total financial income	420	1 433
Financial expenses
Interest expenses	-	-414
Write-down loan receivable	- 2 379	-
Write-down unlisted shares	- 499	-768
Other financial expenses	-339	-338
Total financial cost	-3 217	-1 520
Total financial net	-2 797	-87
Of which:
Interest income from instruments valued at accrued acquisition value	420	1 433
Interest expenses from instruments valued at accrued
acquisition value	0	-414

Note 17 | Interest income and expenses - Parent Company

		Parent Company
	2010	2009
Interest and similar income
Interest on current investments	-	-
Interest income bank deposits	3	10
Total interest and similar income	3	10
Interest and similar expenses
Other interest expenses	-	-5
Total interest and similar expenses	0	-5
Total	3	5

Note 18 | Taxes

		Group		Parent Company
	2010	2009	2010	2009
Current tax 1)	-54	257	-	-
Total	-54	257	0	0

1) Primary foreign subsidiaries.

Correlation between tax expense for the year and reported profit/loss before tax

	Group			Parent Company
	2010	2009	2010	2009
Reported profit/loss before tax	-77 272	-20 935	-45 590	1 167
Tax in accordance with current tax rate of 26,3 %	20 323	5 506	11 990	-307
Tax impact of non-deductible expenses
Intra-group adjustments that disregard
deferred tax	272	1326	-	-
Other non-deductible expenses	-8 880	-898	-12 100	-4
Other adjustments	-	-	-	-
Tax impact of non-taxable income	56	4	-	-3
Adjustment for tax effects in foreign group companies	-3 146	-1 518	-	-
Increase/decrease of tax deficits without
corresponding capitalization	-8 679	-4 163	110	314
Tax reported	-54	257	0	0

Tax deficit

Group		Parent Company
2010	2009	2010	2009
-457 759	-443 315	-27 536	-28 704
-34 284	-15 920	418	1 168
-	1 476	-	-
-492 043	-457 759	-27 118	-27 536
129 407	120 391	7 132	7 242

There are no temporary differences

The nominal value of tax assets (26,3 %) in accordance with the above have been reported at 0 in the balance sheet. Due to the fact that the Group still reports a loss, the nominal value of tax assets is not reported in the balance sheet.

Tax deficit refers to the Swedish companies, and is not limited in time. Further tax deficit in Anoto Maxell, Japan, amounts to approximately MSEK 17 and is not limited in time.

Note 19 | Capitalized development expenditures

	Group			Parent Company
	2010	2009	2010	2009
Acc umulated historica l costs
Opening accumulated historical costs	143 820	139 390	24 218	24 218
Acquisitions for the year 1)	7 943	4 430	-	-
Closing accumulated historical costs	151 763	143 820	24 218	24 218
Acc umulated amortizations and impairment losses acc ording to plan
Opening accumulated amortizations	-117 370	-112 810	-24 218	-24 218
Amortizations for the year according to plan	-5 003	-4 560	-	-
Impairment losses for the year	-26 330	-	-	-
Closing amortizations and impairment losses according to plan	-148 703	-117 370	-24 218	-24 218
Closing residual value	3 060	26 450	0	0

1) Internally developed

Amortizations by function are shown in Note 14.

Impairment losses are reported on line "Other operating costs", Note 13.

Note 20 | Patents

	Group			Parent Company
	2010	2009	2010	2009
Acc umulated historica l costs
Opening accumulated historical costs	76 515	72 884	13 930	13 911
Acquisitions for the year 1)	4 096	4 082	4	19
Disposals for the year	-	-451	-	-
Closing accumulated historical costs	80 611	76 515	13 934	13 930
Acc umulated amortizations and impairment losses acc ording to plan
Opening accumulated amortizations	-50 352	-44 018	-13 353	-13 236
Amortizations for the year according to plan	-6 510	-6 509	-118	-117
Disposals for the year	-	175	-	-
Impairment losses for the year	-1 528	-	-	-
Closing amortizations and impairment losses according to plan	-58 390	-50 352	-13 471	-13 353
Closing residual value	22 221	26 163	463	577

1) Internally developed

Amortizations by function are shown in Note 14.

Impairment losses are reported on line "Other operating costs", Note 13.

Note 21 | Brands

		Group		Parent Company
	2010	2009	2010	2009
ACCUMULATED HISTOR ICAL COSTS
Opening accumulated historical costs	852	514	69	47
Acquisitions for the year 1)	252	338	-	22
Closing accumulated historical costs	1 104	852	69	69
ACCUMULATED AMORT IZATIONS ACCORDING TO PLAN
Opening accumulated amortizations	-245	-180	-18	-11
Amortizations for the year according to plan	-97	-65	-7	-7
Closing amortizations according to plan	-342	-245	-25	-18
Closing residual value	762	607	44	51

1) Internally developed

Amortizations by function are shown in Note 14.

Note 22 | Other intangible assets

		Group		Parent Company
	2010	2009	2010	2009
ACCUMULATED HISTOR ICAL COSTS
Opening accumulated historical costs	10 261	6 439	0	-
Acquisitions for the year 1)	-	-	-	-
Reclassifications	-	3 822	-	-
Closing accumulated historical costs	10 261	10 261	0	0
ACCUMULATED AMORT IZATIONS AND IMPAIRMENT LOSSES ACCORDING TO PLAN
Opening accumulated amortizations	-2 096	-690	0	-
Amortizations for the year according to plan	-1 302	-1 406	-	-
Impairment losses for the year	-2 966	-	-	-
Closing amortizations and impairment losses according to plan	-6 364	-2 096	0	0
Closing residual value	3 897	8 165	0	0

1) Internally developed

Amortizations by function are shown in Note 14.

Impairment losses are reported on line "Other operating costs", Note 13.

Note 23 | Goodwill

	Group
	2010	2009
Acc umulated historica l costs
Opening accumulated historical costs	298 674	302 496
Acquisitions for the year	-	-
Reclassifications	-	-3 822
Closing accumulated historical costs	298 674	298 674

Impairment testing

Anoto technology and products are sold by all sales companies within the Group, i.e. the Group has only one branch of business. The focus of management reporting is the level of sales within the different application areas. These application areas are not independent cash-generating units and the impairment testing of intangible assets is performed based on cash flow projections from Group totals.

Impairment testing of goodwill is performed annually or when an indication of decline in value occurs. The recoverable value for Group business is defined based on calculations of value in use.

In the calculation of value in use a discount factor of 12.5 % has been applied. The measurement of value in use is based on management´s estimated cash flow forecast for a period of five years. Cash flow for the ensuing years has been extrapolated using an assumed annual growth of two per cent. As a precautionary measure when calculating the cash flow, the margins have been reduced with two per cent annually the first five years together with an increase of operating costs with five per cent annually during the same peiod.

Important variables	Method for estimating amounts
Market growth	Group management expects a long-term positive development on the markets where Anoto´s products are used. The growth forecast
	is built on underlying forecasts and discussions with partners and customers together with the expected long-term growth.
Discount rate	The discount rate is determined with regards to the market conditions and the required return of the Group.
Gross profit	The long-term forecasted gross profit is calculated with caution compared to present level, but it is reasonable to expect lower
	margins as the market matures. The ambition is however still to keep up the gross profit margin.
Cost increase	The Group has taken measures during 2010 to reduce the costs, a work that is expected to give favourable effects. It is however
	reasonable to calculate with a general cost increase over time which in the forecast is expected to be in line with the inflation.

The recoverable value exceeds the reported value by MSEK 41. Reported value does not include depreciation or impairment.

The variables used in the calculation of future value in use to estimate eternally cash flow and the changed values showing the recoverable value equal to reported value are the following:

Variable	Assumed value	Changed value *
Market growth	2 %	0.13 %
Discount rate	12.5 %	13.62 %
Gross profit	56 %	52 %
Cost increase	5 %	15 %

* The variables´ assumed values have changed one by one, respectively. When the value of one variable changes, possible effects on other variables have been considered.

Note 24 | Equipment and tools

		Group		Parent Company
	2010	2009	2010	2009
Acc umulated historica l costs
Opening accumulated historical costs	25 532	20 371	749	1 049
Acquisitions for the year	2 743	6 040	-	-
Adjustment to opening balance	-	-110	-	-
Disposals for the year	-2 160	-437	-	-300
Translation difference	81	-332	-	-
Closing accumulated historical costs	26 196	25 532	749	749
Acc umulated deprecia tions acc ording to plan
Opening accumulated depreciations	-16 348	-15 092	-636	-693
Depreciations for the year according to plan	-3 012	-1 914	-64	-113
Adjustment to opening balance	-	110	-	-
Disposals for the year	2 159	296	-	170
Translation difference	-52	252	-	-
Closing depreciations according to plan	-17 253	-16 348	-700	-636
Closing residual value	8 943	9 184	49	113

Depreciations by function are shown in Note 14.

N ot e s

Note 25 | Participation in Group companies

		Parent Company
	2010	2009
Opening balance	267 194	267 194
Opening shareholders´ contribution	464 603	464 603
Opening accumulated impairment losses	-464 603	-464 603
Shareholders´contribution 1)	46 000	-
Impairment loss for the year 2)	-46 000	-
Total	267 194	267 194

1) Unconditional shareholders´contribution to Anoto AB

2) Write-down of shares in Anoto AB

			Total No. of	% of capital	Shareholders´	Carrying
Company	Reg.No.	Domicile	participation	and votes	equity	amount
Anoto AB	556320-2646	Lund	5 000	89.0 % 1)	851	267 005
Anoto Licensiering AB	556665-4306	Lund	1 000	89.0 % 1)	95	89
Anoto Administration AB	556591-2481	Lund	1 000	100.0 %	2 300	100
						267 194

The Anoto Group contains sub-groups consisting of the following companies

Anoto Inc., USA

Anoto Maxell K.K., Japan

FAB Licensiering AB, Sweden

Anoto IP Lic HB, Sweden C Technologies AB , Sweden

1) The remaining 11 % are held by Anoto Administration AB.

Note 26 | Participation in associated companies

		Group
	2010	2009
Opening balance	0	1 640
Share of profits in associated company	-	-
Reclassification 1)	-	-1 640
Total	0	0

1) Due to a new share issue Anoto AB's share in Anoto Taiwan has been diluted during 2009 and Anoto Taiwan is no longer an associated company.

Note 27 | Other long-term investments

		Group
	2010	2009
Opening balance	872	-
Reclassification 1)	-	1 640
Write-down 2)	-499	-768
Total	373	872

1) Reclassification of shares in Anoto Taiwan

2) Write-down of shares in Anoto Taiwan

Other long-term investments are classified in the category Unlisted shares.

Note 28 | Other long-term receivables

		Group
	2010	2009
Opening balance	1 963	28 959
Additions	-	1 021
Reclassification 1)	-	-8 071
Payments 2)	-	-19 800
Translation difference	-195	-146
Total	1 768	1 963

1) Reclassification of receivable on ARM Ltd into a current receivable.

2) Receivable from Livescribe has been paid during 2009.

The receivables concern deposits in full.

Note 29 | Accounts receivable

	2010			2009
	Gross	Net	Gross	Net
Not due	6 602	6 602	33 340	33 340
Due 1 - 30 days	11 511	11 013	10 736	10 736
Due 31 - 60 days	998	619	807	715
Due 61 - 90 days	1 051	756	1 020	-
Due more than 90 days	4 095	149	4 291	222
Total	24 257	19 139	50 194	45 013

The risk that the Group´s customers will not fulfill their obligations, meaning that payments are not received from the customers, is a credit risk. The Group´s customers undergo credit checks whereby information on the financial position of the customers is obtained from various credit reporting agencies. The Group has drawn up a credit policy stipulating how customer credits are to be handled.

Assessment of the need of provisions of Accounts receivable due more than 90 days, are made on an individual basis.

No securities related to Accounts receivable are held by Anoto.

No individual receivable exceed 10 % of total Accounts receivable.

Concentration of credit risk		2010			2009
	No. of customers	% total No. of customers	% share of value	No. of customers	% total No. of customers	% share of value
Exposure <1 MSEK	105	95 %	35 %	128	90 %	16 %
Exposure 1-10 MSEK	6	5 %	65 %	13	9 %	61 %
Exposure > 10 MSEK	0	0 %	0 %	1	1 %	23 %
Total	111	100 %	100 %	142	100 %	100 %

Note 30 | Prepaid expenses and accrued income

	Group			Parent Company
	2010	2009	2010	2009
Prepaid rent	1 852	1 072	-	-
Prepaid leasing fees	292	835	-	-
Prepaid insurance	254	163	-	-
Accrued income	1 709	1 759	-	-
Other	1 394	2 599	155	103
Total	5 501	6 428	155	103

Note 31 | Provisions for product warranty commitments

	Group			Parent Company
	2010	2009	2010	2009
Opening balance	706	800	-	-
Amounts utilized	-31	-77	-	-
New provisions	357	668	-	-
Unutilized reversed amounts	-203	-685	-	-
Total	829	706	0	0

Provisions for product warranty commitments relate essentially to the sale of pens during 2010 and 2009. The provisions are based on calculations made on historical data for warranties related to the sale of pens. The whole amount is expected to be paid within 12 months.

Note 32 | Accrued expenses and deferred income

		Group	Parent Company
	2010	2009	2010	2009
Holiday pay liability	4 087	3 272	-	-
Accrued social security	1 291	2 635	152	241
Accrued social security pensions	5 266	2 526	188	186
Accrued salaries and remunerations	13 774	1 787	483	767
Deferred income	-	4 155	-	-
Other	1 038	5 971	200	648
Total	25 456	20 346	1 023	1 842

Note 33 | Share-based payments to employees

Change in outstanding option programmes during the year

		2010		2009
	No. of	Weighted	No. of	Weighted
	options	issue price	options	issue price
Outstanding options at the beginning of the period	585 000	18	585 000	18
Expired during the period	-585 000		-	-
Outstanding options at the end of the period	0	0	585 000	18
Redeemable at the end of the period	0		0

*) No redemption has taken place during 2009 or 2010.

The annual meeting, May 15, 2007 decided to issue 500,000 employee stock options and 500,000 warrants. The employee stock options were hedged by issuing of 650,000 warrants, which also included the payroll overhead. In the beginning of the year 440,000 had been awarded to employees and 145,000 had been awarded to a subsidiary to hedge against payroll overhead. The options which are tied to employment could be exercised from September 1, 2009 to March 31, 2010. Granting of options was based upon achieving budget targets for 2007 and 2008. The internal targets were not achieved and no granting of options has occured.

The fair value of each option issued is calculated in accordance with the Black-Scholes model.

The actual cost for the personnel options is SEK 0. In accordance with IFRS cost of TSEK 0 (150) has been reported in the result for the year.

Note 34 | Leasing expenses

The Group has no finance lease commitments. The amounts associated with equipment at the company´s disposal through leases are negligable. The Group´s commitment for leased premises totals to TSEK 6 373 for 2011 and TSEK 19 816 for 2012 - 2014.

Note 35 | Pledged assets

	Group			Parent Company
	2010	2009	2010	2009
Blocked bank deposits	30 933	12 591	-	-

Bank deposits are pledged as security for Letters of Credit and Bank Guarantees.

Note 36 | Contingent liabilities

		Group		Parent Company
	2010	2009	2010	2009
Contingent liability for group companies	2 002	-	-	-
Contingent liability, others	-	888	-	-
Total	2 002	888	0	0

Note 37 | Financial instruments

	Loans and accounts receivable	Investments held until maturity	Financial assets measured at fair value in profit and loss: Held for trade 1)	Unlisted shares and participa tions	Other liabilities	Total book value	Fair value
Group 2010
Investments	-	-	-	373	-	373	373
Long-term receivables	1 768	-	-	-	-	1 768	1 768
Accounts receivable	19 139	-	-	-	-	19 139	19 139
Other receivables	-	-	2 815	-	-	2 815	2 815
Short-term investments and securities	-	-	-	-	-	0	0
Assets	20 907	0	2 815	373		24 095	24 095
Accounts payable	-	-	-	-	15 562	15 562	15 562
Other liabilities	-	-	-	-	7 384	7 384	7 384
Liabilities	0	0	0	0	22 946	22 946	22 946

			Financial assets	Unlisted
	Loans and	Investments	measured at fair value	shares and		Total
	accounts	held until	in profit and loss:	participa	Other	book	Fair
	receivable	maturity	Held for trade 1)	tions	liabilities	value	value
Group 2009
Investments	-	-	-	872	-	872	872
Long-term receivables	1 963	-	-	-	-	1 963	1 963
Accounts receivable	45 013	-	-	-	-	45 013	45 013
Other receivables	-	-	504	-	-	504	504
Short-term investments and securities	-	-	-	-	-	0	0
Assets	46 976	0	504	872	0	48 352	48 352
Accounts payable	-	-	-	-	18 767	18 767	18 767
Other liabilities	-	-	-	-	4 344	4 344	4 344
Liabilities	0	0	0	0	23 111	23 111	23 111

1) Related to currency forward contracts only

Anoto Group policy is to hedge the net flow of EURO, USD and JPY for six months at a time by means of forward contracts. Forward contracts are reported on the balance sheet closing date at fair value. Forward contracts totalled EUR 8.000 thousand, USD 1.000 thousand and JPY 200.000 thousand at the end of 2010.

Disclosures on fair value classification

Group 2010

	Level 1	Level 2	Level 3	Total
Short-term receivable - derivatives	-	2815	-	2815
Group 2009
	Level 1	Level 2	Level 3	Total
Short-term receivable - derivatives	-	504	-	504

Level 1: According to listed prices on an active market for similar instruments Level 2: According to directly or indirectly observable market data not included in level 1 Level 3: According to indata not observable on the market

Estimation of fair value

Derivative instruments

Fair value for currency contracts are determined according to listed prices, if available. Otherwise the fair value is determined by discounting of the difference between the agreed forward rate and the forward rate prevailing on closing day for the remaining contracts period. The discount rate is based on the risk-free interest rate of government bonds.

Accounts receivable and accounts payable

For accounts receivable and accounts payable with a remaining life of less than six months, recorded amount is deemed to reflect fair value. Accounts receivable and accounts payable with a due time over six months are discounted at the time of determining the fair value.

Note 38 | Related parties

Since the Annual General Meeting in May 2010, when Paddy Padmanabhan (DoubleDay) and Joonhee Won (TStone) joined as members of the Anoto Board, sales to TStudy and ExpeData are classified as related parties transactions. All transactions have been made on normal commercial conditions.

Summary of related party transactions

Parent Company Related parties		Selling of goods and services	Purchasing of goods and services	Other	Receivable on related party on December 31	Liability to related party on December 31
Group company	2010	4 509	-	-48 931	139 720	-
Group company	2009	9 126	-	-17 280	184 142	-
group Related parties		Selling of goods and services	Purchasing of goods and services	Other	Receivable on related party on December 31	Liability to related party on December 31
Shareholders:
Expedata (DoubleDay Acquisition III LLC)	2010	3 164	-	-	1 314	-
TStudy (Aurora Investment Ltd)	2010	7 085	-	-	584	-

For transactions with Board and Executives, see note 9.

Note 39 | Equity

Translation reserve
	2010	2009
Accumulated exchange rate differences at beginning of the year	-77	-152
Exchange rate differences for the year	1 185	75
Accumulated exchange rate differences at the year end	1 108	-77

Capital treatment

The Anoto Group has since it was founded in 1999 worked on developing a digital pen enabling digital transfer of data written with a digital pen to a computer or similar. Development costs have been significant and since 1999 approximately MSEK 1,600 have been invested as capital by the shareholders. The company´s ambition is to achieve profitable growth and in the future to be able to pay dividend on invested capital. Anoto Group has so far not paid any dividend and will suggest to the Annual General Meeting of 2011 that no dividend shall be paid out. The company has no outspoken targets regarding dividend, debt/equity ratio or other capital ratios other than the strive for profitability and positive cash flow. When solid profitability has been achieved, targets for dividend, debt/equity ratio etc. will be determined.

Note 40 | Specification to Statement of Cash Flows

Liquid assets Group Parent Company 2010 2009 2010 2009 Cash and bank balances 81 044 80 770 1 042 1 286 Short-term placements comparable to cash and equivalents - - - - Total 81 044 80 770 1 042 1 286 Interest paid and dividends received Group Parent Company 2010 2009 2010 2009 Dividend received - - - - Interest received 420 1 433 3 10 Interest paid -339 -752 - -5 Total 81 681 3 5

N ot e s

Note 41 | Parent Company details

Anoto Group AB (publ.) is a Swedish limited company with its registered office in Stockholm. The shares of the Parent Company are listed on the NASDAQ OMX Stockholm Stock exchange. The address of the head office is Traktorvägen 11, SE 226 60 Lund. The consolidated financial statements for 2010 relate to the Parent Company and its subsidiaries, jointly referred to as the Group.

Note 42 | Events after December, 31 2010

No material events or issues after the closing of 2010 are to be reported.

Lund, April 6, 2011

Stein Revelsby Jörgen Durban Paddy Padmanabhan Chairman of the Board

Joonhee Won Charlotta Falvin Torgny Hellström CEO

Our auditor´s report was submitted on April 6, 2011 KPMG AB

Eva Melzig Henriksson Authorized Public Accountant

Audit Report

To the annual meeting of the shareholders of Anoto Group AB (publ.) Corporate identity number 556532-3929

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of Anoto Group AB (publ.) for the year of 2010. The annual accounts and the consolidated accounts of the company are included in the printed version of this document on pages 20-52. The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by board of directors and the managing director and significant estimates made by the board of directors and the managing director when preparing the annual accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the managing director. We also examined whether board member or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with international financial reporting standards IFRSs as adopted by the EU and the Annual Accounts Act and give a true and fair view of the group's financial position and results of operations. The statutory administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the annual meeting of shareholders that the income statement and balance sheet of the parent company and the statement of comprehensive income and the statement of financial position of the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the statutory administration report and that the board of directors and the managing director be discharged from liability for the financial year.

Malmö, April 6, 2011

KPMG AB

Eva Melzig Henriksson Authorized Public Accountant

Corporate governance report 2010

Anoto Group AB (publ.) is governed by its Articles of Association and the Swedish Companies Act. Since Anoto is listed on NASDAQ OMX Stockholm, Anoto also applies NASDAQ OMX Stockholm's Rule Book for Issuers.

Since July 1, 2008, Anoto applies the Swedish Code of Corporate Governance ("the Code") which requires that a Corporate Governance Report be prepared. The report has been reviewed by the Company's auditor and the report can be found on page 57.

Corporate governance structure

Anoto is governed and controlled by several bodies.

The shareholders exercise their voting rights at General Meetings of the Shareholders by electing the Board of Directors and external auditors and making decisions on other issues like the adoption of the annual report and stipulating how to appoint the Nomination Committee.

The Nomination Committee nominates candidates to the Board of Directors, Chairman of the Board and external auditors. A Nomination Committee is required by the Code, but not by the Companies Act.

The Board is responsible for the appointment of the CEO, the developing of long-term strategy, and controlling and evaluating Anoto's day-to-day operations. Some duties of the Board are partly exercised by the Compensation Committee and the Audit Committee.

The CEO is in charge of and responsible for the daily operations and the management of Anoto in accordance with instructions and guidelines from the Board of Directors.

External auditors appointed by the shareholders at the Annual General Meeting examine the Company's annual report and accounts as well as the management by the Board of Directors and the CEO.

Annual General Meeting

The Annual General Meeting is the corporate body where the shareholders in Anoto can exercise their rights by electing the Board of Directors and deciding on all other issues voted on at Annual General Meetings in accordance with the Companies Act and the Articles of Association.

The Annual General Meeting is held in Lund, normally in the first half of May. The notice of the Annual General Meeting, together with the agenda, is published on Anoto's website and in the Swedish newspaper Dagens Nyheter, and Post och Inrikes Tidningar (the Swedish Official Gazette). As a courtesy, the date and place for the Annual General Meeting together with information on how to obtain the agenda is published in the Swedish newspaper Sydsvenska Dagbladet.

All information material for the Annual General Meeting is available in both Swedish and English. The Annual General Meeting is held in Swedish. To date, the composition of shareholders in Anoto has not given reasons to translate the Annual General Meeting into English.

Annual General Meeting 2010

The Annual General Meeting (AGM) in 2010 took place in Lund on May 5. Hans Otterling, Charlotta Falvin, Leif Eriksrød and Stein Revelsby were present from the Board of Directors. Present were also Anoto's external auditors and the Chairman of the Nomination Committee.

The Annual General Meeting made the following decisions:

• The annual report was presented, and the consolidated income statements and balance sheets were adopted. The Board Members and CEO were discharged from liability. No dividends were to be paid.
• Board Members Hans Otterling, Stein Revelsby and Charlotta Falvin were re-elected Board Members, and at the same time Jörgen Durban, Joonhee Won and Paddy Padmanabhan were elected new Members of the Board until the end of the next Annual General Meeting. Leif Eriksrød and Håkan Eriksson had declined re-election.
• Jörgen Durban was elected Chairman of the Board.
• The proposal of the Nomination Committee on how to appoint members of the Nomination Committee, as well as the assignment for the Nomination Committee, was approved.
• The Board of Directors was authorized to, on one or several occasions prior to the next Annual General Meeting, resolve on an issue of a maximum of 12,000,000 new shares with provisions for non-cash payment or payment against set-off of claims or else on conditions enabling the waiving of preferential rights of shareholders.
• The guidelines for compensation to the CEO and other executives of the Company were adopted in accordance with the proposal of the Board of Directors.

Anoto's Annual General Meeting 2011

Anoto's Annual General Meeting 2011 will take place on May 12, 2011 in Lund.

Nomination Committee

The Annual General Meeting 2010 resolved, in accordance with the proposal presented by the Nomination Committee, that the Chairman of the Board of Directors be assigned to contact four of the Company's major shareholders, according to the list of shareholders at the end of September 2010, and ask them to appoint one representative each no later than six months prior to the Annual General Meeting 2011 to, together with him, form the Nomination Committee until a new Nomination Committee has been appointed. The Nomination Committee shall appoint a Chairman. The Chairman of the Board shall not be the Chairman of the Nomination Committee. The majority of the Nomination Committee members shall not be Board Members of Anoto.

The Nomination Committee formed for the Annual General Meeting 2011 was announced on November 12, 2010, as folllows: Joonhee Won representing Aurora Investment Ltd (Chairman of the Nomination Committee), Per Boasson representing Essensor AS, Paddy Padmanabhan representing DoubleDay Holdings, Jan Andersson representing Swedbank Robur Fonder and Jörgen Durban, Chairman of the Board.

The formation of the Nomination Committee deviates from point 2.4 of the Swedish Code of Corporate Governance in the following three respects:

• The majority of the Nomination Committee members are Board members of Anoto Group AB. These Board members are Joonhee Won, Paddy Padmanabhan and the Chairman of the Board Jörgen Durban.
• Board member Joonhee Won is Chairman of the Nomination Committee.
• Two of the Board members of the Nomination Committee, Joonhee Won and Paddy Padmanabhan, may not be consid-

ered independent i relation to major owners of the company (Aurora Investment Ltd and DoubleDay Holdings, respectively).

The reasons for these deviations are that the owners Aurora Investment Ltd and DoubleDay Holdings, who in accordance with the decision of the Annual meeting 2010 shall propose one representative each to the Nomination Committe, have chosen to elect the Board members Joonhee Won and Paddy Padmanabhan, respectively, to members of the Nomination Committee. These owners have explained that the reasons to elect Board members as their representatives of the Nomination Committee are that these Board members are well suited to contribute, and in relation to Joonhee Won, to preside over the work and tasks of the Nomination Committee in an efficient manner to achieve the best result for the shareholders of the company.

The Nomination Committee shall prepare and present to the Annual General Meeting 2011 proposals for the following issues:

• 1. Chairman at the Annual General Meeting
• 1. Chairman and other Members of the Board
• 1. Fees to the Board of Directors
• 1. Fees to the Auditors
• 1. The Nomination Committee in respect of the Annual General Meeting 2012

The Nomination Committee proposal for Board Members shall be presented in the notice for the Annual General Meeting 2011 as well as on the company's website.

The Board of Directors

The Board of Directors, which also appoints the CEO, is ultimately responsible for the organization of Anoto and the management of its operations. According to Anoto's Articles of Association, the Board shall consist of not less than three and not more than eight directors with not more than five deputies. For information about the Board Members and their remuneration, please refer to page 39 in the Annual Report. All Board Members are independent of Anoto's management. They are also independent of Anoto. All Board Members except Joonhee Won and Paddy Padmanabhan are independent of the larger shareholders in Anoto.

Rules of Procedures

The Board of Directors has adopted Rules of Procedures that outlines the work procedures and tasks for the Board, the Audit Committee and the Nomination Committee. However, the Rules of Procedure do not in any way change or alter the responsibility of the Board or individual Board Member according to applicable laws and NASDAQ OMX Stockholm's Rule Book for Issuers. The Rules of Procedures are reviewed and adopted at least once a year.

Work of the Board of Directors in 2010

The Board of Directors consists of six members elected by the Annual General Meeting on May 5, 2010. In November 2010 Hans Otterling announced his resignation as Board member of Anoto Group AB. Jörgen Durban has served as Chairman of the Board. The CEO and CFO take part in board meetings. The Company General Counsel or the CFO is the secretary of the Board. When appropriate, other employees of the company participate in reporting capacities concerning their particular areas of expertise.

The Board continuously evaluates the performance of Anoto, the CEO and Anoto's Management.

Eleven of the seventeen meetings in 2010 were part of the Board's annual schedule. In addition to the Board's ongoing effort to issue directives and monitor the company's activities – including the budget, state of the market and strategic direction – the main issues discussed at the meetings were as follows:

• February: Review of quarterly and annual accounts with the Company's auditor
• May: Review of quarterly accounts and meeting of the Board members following election at the Annual General Meeting
• June: The strategy for Anoto
• August: Review of quarterly accounts and discussion of Company's direction
• November: Review of quarterly accounts and discussion of Company's direction
• December: Adoption of 2011 budget

Documentation is normally distributed approximately one week prior to a meeting. The CEO submits a monthly written report to the Board. The Board has two Committees – an Audit Committee and a Compensation Committee – that prepare items for the Board to take up and in certain cases reach decisions delegated to them by the Board.

The Board Members attendance at Board Meetings and Committee Meetings is set forth below as follows:

Board Member:	Number of Board Meetings:	Number of Audit Committee Meetings:
Jörgen Durban**	9/10
Hans Otterling	12/15	1/1
Charlotta Falvin	17/17	0/1
Stein Revelsby	16/17	2/2
Joonhee Won**	8/10
Håkan Eriksson*	2/7	0/1
Paddy Padmanabhan**	10/10	1/1
Leif Eriksrød*	7/7	1/1

*) Board Member upto the AGM 2010

**) Board Member elected at the AGM 2010

Audit Committee

The Audit Committee deals with audits, their focus and their scheduling. Under the Code the Audit Committee should consist of three Board Members. The Board decided it would consist of two Members, Paddy Padmanabhan as Chairman and Stein Revelsby. The reason is the limited resources in relation to the total work load of the Board. In addition, principal matters have been referred to the Board for resolution. The Audit Committee was expanded with one Member on March 17, 2011, to a total of three Members by the appointment of Charlotta Falvin as additional Member. The reason was that new information had transpired that could result in Stein Revelsby not being considered independent from Aurora, since he had had a consulting agreement with Aurora. In such a case the Audit Committee would not have had a Member independent of larger owners. The consulting agreement has been terminated. The Committee held two meetings in 2010. At the meetings, the auditor presented the schedule for the annual audit, discussed risk assessments and reported on reviews that had been completed.

Meetings held by the Committee are reported to the Board by the Chairman of the Audit Committee at the Board Meeting following the Committee meeting.

Compensation Committee

The Compensation Committee consists of Charlotta Falvin and Joonhee Won as chairman and handles remuneration for the CEO and management, as well as incentive programs. The Committee held two meetings in 2010. The work of the Compensation Committee has also been performed on an ongoing basis along with the work of the Board.

The 2010 Annual General Meeting adopted guidelines for compensation to senior executives.

CEO and Management

The Management Team consists of seven persons, see Annual Report page 59, with the CEO in charge. The CEO and Management Team manage and control Anoto's daily operations.

Internal control

The Board of Directors is responsible for the internal control under the Swedish Companies Act and the Swedish Code of Corporate Governance. This section on internal control is focused on the internal control of the financial reporting. Given the size of Anoto, the Board has determined that there is no need for an internal audit department or function, and that Anoto's finance department sufficiently can carry out the internal control in cooperation with the external auditors.

Control Environment

The corporate culture of Anoto encourages initiatives while assuming responsibility for meeting the defined strategic objectives of Anoto. The culture is based on trust, confidence and personal responsibility. Each employee at Anoto has a job description setting out tasks, responsibilities and authorizations.

Anoto has an "open door policy" and all employees can discuss any issue, concern or matter directly with the CEO or a member of the Management Team.

The CEO has adopted guidelines and policies for specific areas that the employees are required to follow.

Anoto has implemented a Code of Conduct that is applicable to Anoto and its suppliers. The Code of Conduct describes Anoto's requirements with respect to ethical behavior, child labor and the environment.

A detailed delegation plan has been drawn up with welldefined levels of attestation and decision levels. This is applied throughout Anoto.

Risk Assessment

Risk assessments are performed in order to identify, map and measure the root causes for risks. The most important risk factors for the internal control of the financial reporting are identified at Group and Company level, as well as at a regional level. The risk assessments also include the risk for inappropriate actions and fraud. The outcome of the risk assessments result in actions and tasks that support the internal control of the financial reporting.

Control measures

The Board has implemented a system for control and risk management based on the Board's Rules of Procedure - that also include instructions for the CEO and reports that are to be made to the Board - and the Finance Policy. These rules constitute the framework for the internal control.

Anoto's processes and systems for ensuring effective internal controls are designed with the intention of managing and limiting the risks of material errors in the reporting of financial data, thus ensuring that both strategic and operational decisions are based on accurate financial information.

The operational work of controlling the day-to-day activities is carried out by the CEO and the Management Team. Specific guidelines govern the capacity for decision making on different issues. In addition, there are several operational meeting forums like management meetings and steering committees that address

specific control issues in the operational activities and that effectively steer Anoto towards the defined strategic objectives.

Monitoring

There are general as well as detailed control measures aimed at preventing, discovering and correcting faults and deviations. The control organization is evaluated by the CFO on an ongoing basis with the aim of ensuring quality and efficiency. The CFO actively participates in the recruitment process of all qualified controllers.

The CEO and the CFO continuously keep the Board informed of the Group's financial position, performance and any areas of risk. Anoto's external auditors attend at least two Board meetings per year, at which the auditors provide their assessment and observations on the business processes, accounts and reports. The Chairman of the Board and the Chairman of the Audit Committee are also in regular contact with the auditors.

The Board continuously monitors Anoto's financial performance by comprehensive reports, as well as information from the CFO at all Board Meetings. Regular follow-up, together with a high level of transparency of the reporting material and financial processes ensures compliance with the Company's Finance Policy, thus identifying any deficiencies in the internal control system.

A monthly management report is prepared for each application and geographic area, and is subject to follow up with line management. The internal control also includes detailed annual budgets split on application areas, geographic areas and cost centers. Forecasts are delivered three times a year, in May, August and November. The forecasting follows the same organizational set-up as the annual budget. In December, the Board adopts the budget for the following year.

In addition to the budgeting and forecasting, Anoto's Management Team continuously works with overall three-year strategic scenarios.

Auditor´s report on the Corporate Governance Report

To the annual meeting of the shareholdes in Anoto Group AB (publ.) Corporate identity number 556532-3929.

It is the Board of Directors and the CEO who are responsible for the corporate governance report for the year 2010 on pages 54-57 and that it has been prepared in accordance with the Annual Accounts Act.

As a basis for our opinion that the corporate governance report has been prepared and is consistent with the annual accounts and the consolidated accounts, we have read the corporate governance report and assessed its statutory content based on our knowledge of the company. In our opinion, the corporate governance report has been prepared and its statutory content is consistent with the annual accounts and the consolidated accounts.

Malmö, April 6, 2011 KPMG AB

Eva Melzig Henriksson Authorized Public Accountant

b o a r d o f d i r e c to r s

Jörgen Durban

Jörgen Durban

Chairman of the Board Independent Born in 1956 Board member since 2010 Shareholding: 0 shares in Anoto Group AB Education: LL.M, Stockholm University, Sweden

Charlotta Falvin

Member of the Board Independent Born in 1966 Board member since 2009 Other positions: CEO of TAT. Board member of Fasiro AB and Axis AB Shareholding: 0 shares in Anoto Group AB Education: Master of Science in Business and Economics, Lund University, Sweden

Stein O Revelsby

Member of the Board Independent Born in 1962 Board member since 2005 Other positions: CEO of Norden Technology AS. Chairman of Abyssinia Resources Development AS, Board Member of Cenium AS, Infofinder Inc. Shareholding: 900,000 shares in Anoto Group AB Education: MBE, Norwegian School of Management, Norway

Paddy Padmanabhan

Member of the Board Not considered independent in relation to larger shareholders Born in 1955 Board member since 2010 Other positions: Managing Director of DoubleDay Holdings Ltd. DoubleDay Holdings Ltd owns 12,86 million shares in Anoto Group AB. Board Member of Vision Objects and ExpeData Shareholding: 0 shares in Anoto Group AB Education: MBA, University of Florida, USA

Joonhee Won

Member of the Board Not considered independent in relation to larger shareholders Born in 1965 Board member since 2010 Other positions: CEO of TStone Corporation. TStone Corporation is owned by Aurora Investment Ltd, which owns 22,01 million shares in Anoto Group AB Shareholding: 0 shares in Anoto Group AB Education: MBA, Harvard Graduate School, USA

g r o u p mana g e m e n t

Torgny hellström

Torgny Hellström

CEO Anoto Group AB Born in 1958 Employed since 2004 Shareholding: 20,000 shares in Anoto Group AB Education: LL.M., Stockholm University, Sweden

Dan Wahrenberg

Acting CFO Anoto Group AB Born in 1969 Employed since 2006 Shareholding: 0 shares in Anoto Group AB Education: Master of Science in Business Administration, Lund University, Sweden

MAGNUS HOLLSTRÖM

EVP Technology Licensing Anoto Group AB Born in 1969 Employed since 2001 Shareholding: 57,833 shares in Anoto Group AB Education: Master of Science in Electrical Engineering, Lund University of Technology, Sweden

Christian Delfin

Operations Manager Anoto Group AB Born in 1970 Employed since 2001 Shareholding: 0 shares in Anoto Group AB Education: PhD, Lund University of Technology, Sweden

Pietro Parravicini

President/CEO Anoto Inc Born in 1965 Employed since 2001 Shareholding: 0 shares in Anoto Group AB Education: Post-graduate degree in Corporate Accounting and Financial Management, AKAD Zurich, Switzerland

Anna Liffner

Human Resource Manager Anoto Group AB Born in 1979 Employed since 2000 Shareholding: 0 shares in Anoto Group AB Education: Bachelor of Social Science in Education, Lund University, Sweden

Peter Johansson

CEO C Technologies AB Born in 1965 Employed since 1999 Shareholding: 17,500 shares in Anoto Group AB

The Anoto share

Anoto Group AB (publ.) has been listed on the NASDAQ OMX Stockholm Stock Exchange (ticker: ANOT) since June 16, 2000. Today the share is listed on the Small Cap list of the NASDAQ OMX Nordic Exchange Stockholm. The share was previously traded on the New Market starting on March 15, 2000. Anoto Group's share capital of SEK 2,571,677 is allocated among 128,583,867 shares. Each share entitles the holder to one vote at general meetings and all shares provide equal rights to participation in the company's assets and profits.

SHARE PRICE PERFORMANCE AND TRADING

The price of the Anoto Group share decreased by four per cent from SEK 3,92 to 3,75 during the year. During the same period, the Affärsvärlden General Index was up by 23 per cent and the Stockholm Stock Exchange IT Index increased by 18 per cent. Anoto Group's market capitalization was MSEK 482 on December 31, 2010. On March 10, 2011, the share price was SEK 3,70 and the market capitalization was MSEK 476.

A total of 79,652,992 Anoto shares were traded on the NASDAQ OMX Stockholm Stock Exchange in 2010, at a turnover rate of 62 per cent.

SHAREHOLDERS

At the end of 2010, Anoto Group had 5,975 shareholders. Foreign shareholders controlled 61 per cent; the ten largest shareholders 68 per cent; institutional and industrial investors 90 per cent of the shares.

DIVIDEND POLICY

No dividend will be considered over the next few years. The company's future dividend policy will reflect its earnings, financial position and financing needs. Dividend proposals will be examined in the light of shareholder demands for a reasonable return and the company's internal financing requirements.

OPTION PROGRAMMES

The parent company currently has no outstanding stock option program.

ANALYSTS

Anoto Group is covered by analysts at a number of banks and securities brokers, including Carnegie and Redeye.

PER-SHARE DATA 2010

Number of shares	128 583 867
Number of outstanding options	0
Average number of shares	128 583 867
Average number of outstanding options	0
Earnings per share (SEK)	-0,60
Earnings per share incl. options (SEK)	-0,60
Cash flow per share for the year (SEK)	0
Cash flow per share incl. options (SEK)	0
Shareholders' equity per share (SEK)	3,07
Shareholders' equity per share incl. options (SEK)	3,07

LARGEST SHAREHOLDERS DECEMBER 31, 2010

NAME	%	TOTAL
Aurora Investment Ltd	17,1	22 011 677
Essensor AS	11,9	15 030 758
DoubleDay Acquisition III LLC	10,0	12 860 000
Swedbank Robur Fonder	5,8	7 515 445
Tor Aksel Voldberg	5,1	6 500 000
Barclays Bank	5,0	6 411 034
Carnegie Norway Branch	4,5	5 808 976
Fougner Invest	3,9	5 000 000
SEB Enskilda ASA	2,6	3 336 834
Hitachi Maxell	2,3	2 950 000

Share price and trading volume Jan 2006 – FEB 2011

Share price and trading volume Jan 2010 – FEB 2011

SHAREHOLDERS BY SIZE, DECEMBER 31, 2010

Holdings	Total number of shareholders	% of total number of shareholders	Hold collectively number of shares	% of share capital
1-1000	4 338	72,6	1 324 414	1,03
1001-10000	1 288	21,6	4 731 886	3,68
10001-100000	278	4,7	7 972 200	6,2
100001-	71	1,2	114 555 367	89,09
	5 975	100,0	128 583 867	100,00

Five-year summary

Summary of comprehensive income statements

(SEK thousand)	2010	2009	2008	2007	2006
Net sales	208 395	205 862	143 975	122 733	108 725
Other income	-	-	-	19 180	-
Gross profit	140 092	142 472	97 662	111 145	78 404
Amortization, intangible fixed assets	-12 912	-12 540	-12 159	-13 110	-25 809
Depreciation, property plant & equipment	-3 012	-1 914	-3 011	-2 077	-1 709
Operating profit/loss	-74 4751)	-20 848	-51 645	-19 592	-131 823
Profit/loss on participations in Group companies	-	-	-	-252	-769
Profit/loss on shares in associated companies	-	-	-2 431	-	-
Other financial items	-2 797	-87	-5 974	3 269	794
Profit/loss after financial items	-77 272	-20 935	-60 050	-16 121	-131 798
Tax	-54	257	-853	-628	-1 208
Profit/loss after tax	-77 326	-20 678	-60 903	-16 749	-133 006

1) Incl. TSEK 50 335 for restructuring costs and write-down of capital development expenditures.

Summary of financial position statements

(SEK thousand)	2010.12.31	2009.12.31	2008.12.31	2007.12.31	2006.12.31
Assets
Intangible fixed assets	328 614	360 059	364 025	339 473	343 324
Tangible fixed assets	8 943	9 184	5 279	4 046	3 512
Financial fixed assets	2 141	2 835	30 599	8 560	5 080
Total non-current assets	339 698	372 078	399 903	352 079	351 916
Inventory	25 306	29 356	37 329	5 960	1 936
Accounts receivable	19 139	45 013	32 564	24 062	27 615
Other current assets	14 603	27 686	32 304	51 132	15 669
Cash & bank balances, incl. current investments	81 044	80 770	99 344	131 301	179 841
Total current assets	140 092	182 825	201 541	212 455	225 061
Total assets	479 790	554 903	601 444	564 534	576 977
Shareholders´ equity and liabilities
Shareholders´ equity	394 763	469 105	488 474	452 809	458 237
Non-controlling interest	-3 160	-1 225	-160	2 069	1 959
Long-term liabilities
Non-interest bearing	19 806	31 007	41 891	50 143	4 728
Current liabilities
Non-interest bearing	68 381	56 016	71 239	59 513	112 053
Total liabilities	88 187	85 798	112 970	111 725	118 740
Total shareholders´ equity and liabilities	479 790	554 903	601 444	564 534	576 977

Summary of cash flow statements

(SEK thousand)	2010	2009	2008	2007	2006
Profit/loss after financial items	-77 272	-20 935	-60 050	-6 647	-131 798
Items that do not affect liquidity	49 694	15 554	113 715	16 243	8 913
Change in working capital	42 886	-17 641	-9 318	-39 015	73 642
Cash flow from operating activities	15 308	-23 022	44 347	-29 419	-49 243
Cash flow from investing activities	-15 034	-14 933	-40 257	-20 808	-14 190
Total cash flow before financing activities	274	-37 955	4 090	-50 227	-63 433
Cash flow from financing activities	-	19 381	-36 047	1 687	31 784
Cash flow for the year	274	-18 574	-31 957	-48 540	-31 649

Key ratios

	2010	2009	2008	2007	2006
Sales growth, %	1	43	17	13	neg
Gross margin, %	67	69	68	89	72
Operating margin, %	neg	neg	neg	neg	neg
Profit margin, %	neg	neg	23	neg	neg
Capital employed (TSEK)	391 603	467 880	488 314	454 878	460 196
Return on capital employed, %	neg	neg	neg	neg	neg
Return on shareholders´ equity, %	neg	neg	neg	neg	neg
Proportion shareholders´ funds, %	82	84	81	81	80
Equity/assets ratio, %	82	84	81	81	80
Net debt (TSEK)	-81 044	-80 770	-99 344	-131 301	-179 841
Earnings per share (SEK)	-0,60	-0,16	-0,47	-0,13	-1,03
Earnings per share after dilution (SEK)	-0,60	-0,16	-0,47	-0,13	-1,03
Cash flow per share for the year (SEK)	0,00	-0,14	-0,25	-0,38	-0,25
Cash flow per share after dilution (SEK)	0,00	-0,14	-0,25	-0,38	-0,25
Shareholders´ equity per share (SEK)	3,07	3,65	3,80	3,52	3,56
Shareholders´ equity per share after dilution (SEK)	3,07	3,65	3,80	3,52	3,56
Average No. of employees	108	113	127	103	121
Sales per employee (TSEK)	1 930	1 822	1 134	1 191	1 029
Payroll expenses incl. social security contribution (TSEK)	116 211	95 530	106 375	88 394	121 822
(of which pension premiums)	21 613	12 358	13 337	10 588	10 925

Definitions

Proportion shareholders' funds

Shareholders' equity, non-controlling interest and deferred tax at the end of the year as a percentage of total assets

Return on shareholders' equity

Profit for the year as a percentage of average shareholders' equity

Return on capital employed

Profit after net financial income/expense plus interest expense, divided with an average of capital employed

Gross margin

Gross profit as a percentage of net sales. Gross profit is defined as net sales less cost of goods sold

Shareholders' equity per share Shareholders' equity divided by the weighted average number of shares during the year

Average number of employees Average number of employees during the year

Net debt Interest-bearing liabilities less liquid assets and current investments

Sales per employee Net sales divided by the average number of employees

Sales growth

Increase in net sales as a percentage of net sales for the previous year

Earnings per share

Profit after tax divided by the weighted average number of shares during the year

Operating margin

Operating profit/loss after depreciation and amortization as a percentage of net sales

Capital employed

Total assets less non-interest-bearing provisions and liabilities, including deferred tax liabilities

Equity/assets ratio

Shareholders' equity including non-controlling interest as a percentage of total assets

Profit margin

Profit after financial income/expense as a percentage of net sales

Cash flow per share for the year

Cash flow for the year divided by the weighted average number of shares during the year

Anoto's Annual General Meeting will be held on May 12, 2011 at the Anoto premises Traktorvägen 11 in Lund

Anoto's Annual General Meeting will be held on May 12, 2011 at 4 p.m. at the Anoto premises, Traktorvägen 11 in Lund, Sweden. Any shareholder wishing to participate in the meeting must notify the company in one of the following ways:

• * Phone: +46 46 540 12 00, Fax: +46 46 540 12 02
• * E-mail to AGM.2011@anoto.com
• * In writing to Anoto Group AB, Box 4106, SE-227 22 Lund, Sweden

The notification must reach the company by 12:00 noon on Friday, May 6, 2011. To be entitled to participate, the shareholder must also be entered in the Euroclear Sweden AB share register by May 6, 2011. Any shareholder who has registered his or her shares under a trustee must temporarily register them in his or her own name with Euroclear Sweden AB by Friday, May 6, 2011. When submitting the notification, please state your name, personal identity or corporate identity number, address, phone number and number of registered shares. If you are participating by proxy, you must submit the authorisation to the company prior to the meeting.

Financial reporting

Anoto Group's financial reports are released in Swedish and English. The easiest way to obtain the reports is by downloading them from www.anoto.com or e-mailing a request to AGM.2011@anoto.com or phoning +46 46 540 12 00.

Following is the schedule of Anoto Group's financial reports for its 2011 financial year.

January-March interim report	April 29, 2011
January-June interim report	July 29, 2011
January-September interim report	October 28, 2011
2011 year-end report	February 3, 2012

Anoto Group was founded in 1999 and has created the first commercial system for digital pen and paper. Today, Anoto is world leading in digital pen technology, a technology that enables fast and reliable transmission of handwritten text and illustrations into digital format, not only from paper but also from surfaces such as whiteboards, glass and LCD screens.

Anoto operates through a global partner network that focuses on user-friendly solutions for efficient capture, transmission and storage of data within different business areas, such as healthcare, banking & finance, transport & logistics, facility management and education. Anoto has partners across all continents and in more than 50 countries.

Protecting innovation is central to Anoto and the company currently has more than 360 patents and 200 patent applications.

The Anoto Group has around 80 employees and is headquartered in Lund, Sweden. The company also has offices in Boston och Tokyo. www.anoto.com

Anoto Group AB Traktorvägen 11 SE-227 22 LUND Sweden Phone +46 46 540 1200 Fax +46 46 540 1202

Anoto Inc. 200 Friberg Parkway, Suite 3003 Westborough, MA 01581 United States Phone +1-508-983-9550 Fax +1-508-983-9551

Anoto-Maxell K.K.

7F Dai-3 Nishi Aoyama Bldg. 1-8-1 Shibuya, Shibuya-ku Tokyo Japan 150-0002 Phone +81 (0)3-5774-1212 Fax +81 (0)3-5774-1211

C Technologies AB

Traktorvägen 11 SE-226 60 LUND Sweden Phone +46 46 540 1200 Fax +46 46 540 1202