Lagercrantz Group — Annual Report 2007

Aug 18, 2008

Annual Report 2007/08

Annual General Meeting 2008 and Calendar	This page
Lagercrantz Group in Brief	3
2007/08 in Brief	4
President's Statement	6
Business Concept, Vision, Goals and Strategy	8
Acquisitions	11
Market	12
Divisions	16
– Electronics	16
– Mechatronics	18
– Communications	20
The Lagercrantz Share	22
Several year overview	26
Financial Reports and Audit Report	28
Corporate Governance	55
Board of Directors and Auditors	57
Management	58
Addresses	59

Financial Reports and Audit Report

Administration Report	28
Proposed Allocation of Earnings	31
Income Statement	32
Balance Sheet	33
Changes in Shareholders' Equity	35
Cash Flow Statement	36
Notes	37
Audit Report	54

CONTENTS ANNUAL GENERAL MEETING 2008

The Annual General Meeting of Lagercrantz Group AB will be held at : p.m., Monday, September , at IVA conference centre at Grev Turegatan in Stockholm.

NOTICE OF PARTICIPATION

Shareholders who wish to participate in the proceedings of the Annual Meeting must:

• be entered in the share register under their own name (not in the name of a nominee) in the share register maintained by VPC AB not later than Monday, August , and;
• file notice of their desire to attend to the Company's head office under address Lagercrantz Group AB (publ), Box , se- Stockholm, by telephone +-- , fax +-- , or by e-mail to info@lagercrantz.com not later than at : p.m., Wednesday, August .

Such notice must contain the following information: shareholder's name, personal registration number (organisation number), address, telephone and number of shares represented and the number of any assisting counsel.

Shareholders whose shares are registered in the name of a nominee must, in order to exercise their rights at the Annual General Meeting, temporarily register their shares in their own name. Such re-registration must be completed not later than August . Request for such re-registration must be made to the custodian a few banking days before Monday, August for the registration to take place in time.

CALENDAR

14 August 2008	Interim report for the period  April– June .
1 September 2008	Annual Meeting for the / financial year.
11 November 2008	Interim report for the period  April– September .
10 February 2009	Interim report for the period  April– December .
13 May 2009	Year-end report for the period  April – March .

Published information is available at www.lagercrantz.com

Cover: The bridge on Danish minesweeper m/s Hirsholm, which is equipped with an integrated system for navigation and manoeuvring – Electronic Chart Display and Information System (ECDIS). Information from a number of units is presented in aggregated form on the displays delivered by Lagercrantz company ISIC. The vessel was commissioned in the summer of 2008.

Coverphoto: Brian Hørup Photo: Magnus Fond och Magnus Skoglöf Translation: Ole Böök Taurus Kommunikation / Jernström Offset, Stockholm 2008

This report is a translation of the Swedish language Annual Report. In the event of any discrepancies between this document and the Swedish original, the latter shall govern.

Lagercrantz Group in Brief

Lagercrantz Group is a technology-trading group in electronics, electrics, communication and adjacent areas. The Group operates in a decentralised mode, with value-creating sales close to its customers in several expansive niches. The business is organised in three divisions:

• Electronics markets specialised products in industrial wireless communication and embedded electronic systems for customers' products.
• Mechatronics sells electric and electro-mechanical components and offers customised production of cable harnesses.
• Communications offers products, systems and services in digital image transmission/technical security and access and distributes software.

Lagercrantz works with a decentralised management model pursuant to which decisions are made by the subsidiaries close to customers and suppliers, and where businessmanship is an important competitive advantage.

Lagercrantz creates value by offerin3g advanced technical and business skills combined with products from world-leading manufacturers and proprietary products. Through Lagercrantz, the customer gets the best possible solution for performance, immediate availability and total cost. Customers are mostly industrial companies.

Lagercrantz is active in eight countries in northern Europe and in China. The Group has revenue of approximately SEK 2.2 billion and has 800 employees. The Company's shares are listed on OMX Nordic Exchange since 2001.

• Net revenue increased by 10 percent to MSEK 2,172 (1,974)
• Operating profit increased by 32 percent to MSEK 131 (99)
• The operating margin increased to 6.0 percent (5.0)
• Income after taxes increased to MSEK 91 (65)
• The return on equity increased to 21 percent (16)
• Earnings per share increased to SEK 3.92 (2.75)
• A dividend of SEK 1.50 is proposed (1.25)
• Three acquisitions were made during the year

EARNINGS GROWTH

Lagercrantz Group's focus on raising earnings led to an earnings increase during 2007/08 to MSEK 131 (99). The operating margin was strengthened to 6 percent during the year (5.0) All divisions increased their earnings and margins during 2007/08. Profit after finance items increased to MSEK 121 (90), an increase of 34 percent, which means that Lagercrantz Group again reached its goal of earnings growth of not less than 15 percent.

IMPROVED PROFITABILITY

The Group's return on equity increased to 21 percent, from 16 percent, which signifies a clear step to achieving also the other of the two financial goals, that of a return on equity of 25 percent.

ACQUISITIONS

During the year Lagercrantz continued to make acquisitions. Direktronik AB was acquired with a closing at the beginning of the 2007/08 financial year. Two more acquisitions were made during the year: System Solution in Norway strengthens the Norwegian electronics business and CAD Kompagniet in Denmark broadens the Group's offer in the CAD software field. The CAD Kompagniet closing took place in April of 2008.

Quarterly data 2007/08 and 2006/07

STRONG CASH FLOW

Cash flow from operations increased during 2007/08 to MSEK 120 (76) thanks to improvements in earnings and working capital.

INCREASED REVENUE

Revenue grew during the year by 10 percent to MSEK 2,172 (1,974). Contributing to the increase was acquisitions by about 6 percent and comparable units by 4 percent. All divisions increased their revenue during the year.

DIVIDEND AND REPURCHASE OF SHARES

A total of 1,200,000 class B shares were repurchased during the year for MSEK 37. The Board of Directors has proposed to the Annual General Meeting 2008 a renewed repurchase mandate, and redemption of a portion of the repurchased shares. The Board of Directors has also proposed a dividend of SEK 1.50 (1.25) per share.

Key financial indicators	2007/08	2006/07
Net revenue, MSEK	2,172	1,974
Operating profit, MSEK	131	99
Operating margin, %	6.0	5.0
Profit after finance items, MSEK	121	90
Profit after taxes, MSEK	91	65
Equity ratio, %	44	39
Earnings per share, SEK (based on the average number of shares outstanding)	3.92	2.75
Number of employees at end of period	763	751
Return on equity, %	21	16
Dividend, SEK (proposed dividend for 2007/08)	1.50	1.25

Three years of earnings improvements

Three years of earnings improvements demonstrate that we have found the orientation and strategy for Lagercrantz. Strengthened by the success, we now continue building with sustained focus on margins and growth, organically as well as via acquisitions.

It is particularly gratifying to note that the improvements come from all of our divisions.

The 2007/08 operating year was a third year of solidly improved results. Earnings after finance items increased to MSEK 121, which can be compared to MSEK 90 for the year before and MSEK 55 two years ago. Including the last quarter of the year, we have now have twelve consecutive quarters behind us with improved results compared to the equivalent period one year earlier. Earnings per share for the operating year increased by 43 percent to SEK 3.92 (2.75). One of the Group's financial goals, that of earnings growth of at least 15 percent per year, has thus been surpassed over the past several years. For the second financial goal, that of a return on equity of 25 percent, a clearly positive trend was shown and we reached the 21-percent level for the full year (16). Here we have a way to go, but the increase shows that we are on the right track to achieving this goal as well.

THREE COMPARABLY SIZED DIVISIONS

It is particularly gratifying to note that the improvements come from all of our divisions. Lagercrantz today has three evenly sized divisions, with some 25 profit centres in nine countries. This platform was strengthened in several ways during the year.

Electronics recorded the perhaps most distinct earnings improvement. Operating profit increased by 65 percent to MSEK 38 and the operating margin rose to 4.9 percent (3.1). This is the result of our strategy with niche focus and higher value added.

Within the division we are directing more attention to the

expansive niches of embedded electronics and industrial wireless communication. This was manifested during the year in complementary acquisitions with an IT orientation and electronics in health care in Norway and the venture in Poland with our own products and design services.

Mechatronics' operating profit increased by 43 percent to MSEK 50, equivalent to an operating margin of 8.3 percent (6.5). Here it was especially the business in Elpress, acquired in June 2006 that showed a positive development. New positions have been worked up with important customers and we established the company during the year on the Chinese market. Also our Danish and Finnish operations in customised cable harnesses performed well.

Communications increased its operating profit by 19 percent to MSEK 51, with a slightly improved operating margin of 6.5 percent. In the division it was particularly the Access sub- area that showed clear improvements. Change of suppliers, corporate restructuring in Sweden and newly acquired units (K&K in Finland and Direktronik in Sweden) all lie behind the improvements. In the Software sub-area excellent revenue growth continued to be recorded. In the division's third sub-area, Digital Image Transmission/Technical Security, earnings declined during the year, however, which was a disappointment. The reason is that major projects have not evolved as planned and measures for improved control and organisational adjustments have therefore been implemented.

ACQUISITIONS

During the year we have also advanced our positions when it comes to acquisitions. This is an important element of our growth strategy and during the past two years Lagercrantz has made a number of acquisitions with good results. Ideas for acquisition targets frequently originate among our subsidiaries and we always have a number of processes ongoing aimed at acquiring new companies. We are now continuing with those ambitions and during 2007/08 we strengthened our central organisation with additional acquisition competence.

STRONG POSITIONS IN A GROWING NUMBER OF NICHES

During 2007/08 Lagercrantz Group's efforts to reach additional market niches came to fruition. Compared to the situation before, sales are now more evenly distributed over a larger number of customer segments and with a more even balance among the various market channels. This improves our risk diversification and contributes to stabilising the growth rate.

MANAGEMENT BY OBJECTVE AND DECENTRALISATION

Overall, I am convinced that our organisational model with management by objective and decentralised decision-making generates good results. Strategies are based on each individual profit centre's local customer and market situation and the implementation is greatly influenced by our many leaders and associates.

I would like to extend a special thanks to all associates in the Group for their fantastic engagement and for their many excellent efforts during the year.

FUTURE

Recent unrest in world financial markets has increased the uncertainty regarding the direction of the European industrial economy. However, we see no immediate signs of a more broadly based downturn in demand. We therefore continue to work with a focus on building strong market positions in niches. The platform that has been built in Lagercrantz Group, with three profitable divisions, a well-functioning strategy and diversification in terms of business ideas, customer groups and markets is a good foundation for handling uncertain economic times.

Stockholm, 25 June 2008

Jörgen Wigh President and CEO

Business Concept, Vision, Goals and Strategies

Lagercrantz is a technology trading group that creates customer benefits based on high technical and business knowledge, combined with products from world-leading manufacturers or proprietary products. Our vision is to be a leader in value-creating technology trade with market-leading positions in several expansive niches.

Lagercrantz Group's business concept is – within well-defined niches and in partnership with customers and suppliers – to offer value-creating technical solutions in electronics, electricity, communication and adjacent areas. Lagercrantz deals in customised products, standard components, services, software and systems in those defined technology areas. The value added created by Lagercrantz gives the Group a place as an integral part of customers' product development and day-to-day production, where customers' are offered a high degree of competence, availability and service. For Lagercrantz Group's suppliers this business model means a partnership with a company with efficient marketing activities based on extensive knowledge of the local market and strong customer relationships.

VISION

Lagercrantz Group's vision is to be a leader in value-creating technology trade with market-leading positions in several expansive niches. Lagercrantz Group shall consolidate its position as a profitable and stable growth company by continuing to develop existing businesses in the Group and by acquiring more companies with strong positions in well-defined niches. The vision encompasses three basic concepts: leading, value-creating and market-leading positions.

Leading means that, over time, the Group must live up to three basic requirements: growth, profitability and development. The first two requirements make up the Group's financial goals. The third requirement, development, means that we must create positive changes based on new technology or new solutions in the niches where we conduct business, we must lead the sector's development and develop the organisation of our own business.

Value-creating means that Lagercrantz Group in everything we do we add value to the goods and services offered to the market. By nurturing Lagercrantz Group's collective experience, technical and business knowledge and board contact surface, added value is created for those customers who choose to buy from Lagercrantz Group. This will be achieved by development of new solution based on new products and technologies, by offering design and adaptation to customers' specific needs, and by adding services, support and training.

Market-leading positions in several expansive niches are also a basic maxim. Historically, Lagercrantz Group has succeeded best in businesses that have had a significant role in a niche. That role offers excellent opportunities for sustained profitability and

for challenge by working with the foremost technology suppliers as well as the most demanding customers. A strong position in a well-defined area also means that competent staff can be recruited and retained. That is an important factor for securing leadership over the longer term.

Lagercrantz Group typically defines a niche as a market with a total value of MSEK 200–1,000. A market-leading position means being number one or two in terms of market shares in the niche.

GOALS

Lagercrantz Group's financial goals are:

Earnings growth of 15 percent per year over an economic cycle, measured based on profit after net finance items.

Return on equity of not less than 25 percent.

This means that earnings will double over a five-year period. Internally, for each profit centre, the goals are expressed in terms of requirement for growth, profitability and development. The requirement for profitability means that the return on working capital in a business unit must be at least 45 percent. Other goals are set before each year in connection with the drawing-up of business plans performed by each subsidiary. The goals are continually followed up during the year in order to allow for quick response as needed. For the last two years the Group has been working with clear internal benchmarking in such a way that each subsidiary can measure the outcome for one's own unit relative to other companies in the Group.

The Group has worked with a clear focus on improving the margins in existing businesses, and to add to earnings and revenue by acquisitions. This has led to a situation where Lagercrantz Group has exceeded its goal for earnings growth in 2007/08. The return on equity increased by five percentage points during the year, to 21 percent.

STRATEGY

In order to achieve these goals for earnings growth and profitability, Lagercrantz Group works with six main strategies.

• Decentralisation and management by objective
• A strong corporate culture
• Businessmanship
• Strong positions in niches
• Increased value added
• Acquisitions

When Lagercrantz Group in its financial statements for 2007/08 reports twelve consecutive quarters with improved earnings compared to the corresponding period a year earlier, a major part of the explanation lies in a consistent application of these strategies. They were established following the strategy work during 2004–2005.

DECENTRALISATION AND MANAGEMENT BY OBJECTIVE

Lagercrantz Group has about 25 operating subsidiaries, each of which operates as an individual profit centre with its own identity, its own goals and under its own responsibility. In this way the mission-critical decisions are made close to customers and market. It is here that the knowledge about customers needs is the greatest. This also creates short decision-making paths and promotes a high degree of participation.

The subsidiaries are managed by objective, goals that are longterm based on the Group's three main requirements, for growth, profitability and development. Business plans are drawn up each year for every company with quarterly goals for earnings and how much capital is tied up in the business. Plans are followed up on a regular basis and action is taken as needed.

STRONG CORPORATE CULTURE

Lagercrantz Group grows a strong corporate culture, which traces its origin in the way of working and the approach to business that is characteristic of a successful technology trading company. There is rich lode of collective experience in the Group and this is systematically exploited and disseminated in the form of courses and training, but also by encouraging engagement and team play between associates in different parts of the Group.

The common value base for Lagercrantz Group's corporate culture rests on five concepts:

• Businessmanship the ability to see opportunities, to create good relationships and to focus on earnings.
• Responsibility and freedom the ability to take control and realise own ideas that generate earnings.
• Simplicity the ability to work in a well thought-out and concentrated manner and to find simple solutions.
• Efficiency the ability to prioritise the right things and to do them in the right way.
• Willingness to change the ability to grasp new things and to adapt to the market.

BUSINESSMANSHIP

Businessmanship is something very basic for Lagercrantz Group and distinguishes all work that is done. This concept includes contributing knowledge and acting in such a way that added value is created for the customer – by refining the products of others or by offering our own products. Businessmanship means having a holistic perspective and the ability to recognise new business opportunities and future needs in the marketplace. It also means working close to your customers and to create good sustainable relationships on a long-term basis based on high ethics and honesty. Lagercrantz is a value-creating partner for buyers of technology.

STRONG MARKET POSITIONS IN NICHES

Lagercrantz Group's subsidiaries strive to achieve a strong market position in their niche. A niche consists of a well-defined technology area, customer segment or geographic area with a total market value that is normally in the range of MSEK 200–1,000. This means working on a defined market with considerable possibilities of impacting business terms and conditions. Proximity to the customers, high technical competence and a focused method of working make it possible for us to create sustainable competitive advantages, even in relation to the largest international players. For Lagercrantz Group, having a leading position means to be number one or two in each respective niche.

INCREASED VALUE ADDED

Lagercrantz Group is focused on delivering high value added to its customers, and continually strives to raise it. With knowledge of a local market and specialised technical know-how, Lagercrantz Group contributes to the added value by customising, developing and combining products from different suppliers in the solutions presented to the customers. There is also customer benefit in the fact that Lagercrantz Group makes different manufacturers' products available on the market and offers training, support and service. The degree of refinement is continually enhanced by phasing out standard components and replacing them with products with higher value-added for the customer. New products and services are also increasingly being offered. The development is in the direction of areas which are technically complicated, or open the doors for a unique offer.

ACQUISITIONS

Lagercrantz Group's goal for earnings growth will be realised in part by organic growth and in part by acquisitions. The acquired companies strengthen the market position in existing areas. Acquisitions are also made in order to enter new and interesting areas. It is crucial that acquired companies have a welltested business model and earnings capacity, great competency among its leaders and associates and good growth opportunities. Expansion in the technology areas where Lagercrantz Group is already established are made all over northern Europe. For other areas, which are new to Lagercrantz Group, acquisitions will in the first instance be made in the Nordic Region.

STRATEGIES FOR GROWTH, PROFITABILITY AND DEVELOPMENT

Lagercrantz Group's aggregate strategies generate earnings growth and profitability. Decentralisation and management by objective creates power to grow. The corporate culture gives rise to an organisation that understands and makes use of relationships in an engaged manner. Strong market positions attract the foremost technology suppliers and the most competent associates. Increased value added means greater ability to get better prices and a higher margin. Growth by acquisition contributes to the striving for increased value added, vitalised knowledge and new ideas.

Acquisitions

Acquisitions are an important part of Lagercrantz Group's growth strategy. The strategic group of possible acquisition targets was broadened during the 2005/06 operating year in the interest of raising the rate of growth. That decision opened the way for growing into new technology areas, and set a long-term strategy of acquiring three to five companies per year.

PROCESS

Interesting complementary acquisitions are identified by the subsidiaries, whereas larger acquisitions are processed by the management of Lagercrantz Group. The capacity to make acquisitions was enhanced during the year as two officers are engaged in parallel with acquisition issues together with the subsidiaries. Making successful acquisitions requires a process to identify, evaluate and consummate corporate acquisitions. Lagercrantz Group works with a well-structured process that consists of five phases:

• Listing of potential target companies based on different strategic perspectives.
• Contact with company and owners, clarifying idea, prerequisites, purpose and common grounds.
• Analysis of market and company, drawing up a business plan and negotiating the terms.
• Final negotiations, quality assurance, establishing an integration plan and contract of sale.
• Integration of control and reporting and internal information.

The subsidiaries in the Group have a very important function, especially in the evaluation and contact phase thanks to their local market knowledge and an increasing number of potential target companies are identified via Lagercrantz Group's subsidiaries.

TARGET COMPANIES

Businesses that Lagercrantz Group looks for are often entrepreneur-led companies. It is then important that the seller feels that the company ends up in the right environment and continues to have good opportunities for development.

Lagercrantz Group offers a stable and financially strong platform in a decentralised organisation with a large measure of freedom and a clear responsibility where the company retains its name, location and organisation.

ACTIVITIES DURING THE YEAR

The results of Lagercrantz Group's work with acquisitions during the 2007/08 operating year are that three companies have been acquired: Direktronik in Sweden, System Solution in Norway and CAD Kompagniet, which closed on 1 April 2008. Discussions conducted during the year have also ended with

CASE Direktronik

Direktronik AB is a value-adding importer and reseller of hardware for data and network com-

munication. The company's business idea is to offer a niched range of products, combined with high technological competence and good service. The company's efforts are aimed at Swedish companies and distributors. Since Lagercrantz acquired Direktronik, the company's revenue has increased by more than 20 percent and margins have been strengthened. The main reason for this is the successful work with product line development and selling focus that the former owners now engage in in their capacity of senior managers of the company. Plans for Nordic expansion have also been formed recently.

System Solution

System Solution in Norway was acquired by Acte AS during the year and is now a new business area in Acte. System Solutions has a niched product line of IT products aimed at the health care industry in Norway. With this acquisition opportunities are created for beginning to cultivate this customer segment with a broader product line.

CASE CAD Kompagniet

CAD Kompagniet A/S in Denmark is a consultancy business in Computer-Aided Design. The company is a part of the CAD software business in division Communications from 2008/09. This acquisition further strengthens Lagercrantz Group's market position and at the same time the company is afforded better opportunities to expand.

decisions not to carry out acquisitions. In some of these cases the seller's price expectations were high in the good business climate, which was the case during most of 2007. It is important for Lagercrantz to take the initiative when it comes to acquisition discussions, but also to be able to abstain when prerequisites are not deemed to be right.

OUTLOOK

Lagercrantz Group today sees good prospects for making acquisitions going forward. We look for companies with a proven earnings record and good management. The geographic area is foremost the Nordic Region and the northern parts of Europe. Target companies will have a niche orientation and a strong market position within this niche. Lagercrantz Group's contribution in the form of competence and development opportunities make it possible for good companies to continue and become even better.

Market

Lagercrantz Group is active in trading in the areas of electronics, electricity, communication and adjacent areas. Customers are mainly industrial companies in northern Europe. Lagercrantz Group has the largest part of its sales in Sweden and Denmark. End customers for Lagercrantz Group's products are found primarily in electrical power generation and distribution and electronics.

Lagercrantz Group is a technology trading group active in the market created around the classic manufacturing industry in northern Europe. Lagercrantz Group works exclusively with sales to other companies, so-called business-to-business.

Lagercrantz Group is made up of some 25 units that work with a clear niche focus, which means focus on a limited market, about MSEK 200–1,000 in size, where the individual company can achieve a market position as number one or two.

End customers for Lagercrantz Group's products are found primarily in electrical power generation and distribution, electronics, transportation and telecommunication. As the service sector in the Nordic Region and northern Europe grows ever larger, Lagercrantz Group's sales to the sector have increased and now constitute a growing proportion of net revenue.

DRIVING FORCES

The major driving forces affecting Lagercrantz Group's customers and thus demand on Lagercrantz Group's products comprise the constantly growing demand for reliable energy, the ongoing globalisation of trade and the growth of new markets, especially in Asia. These driving forces are major contributors to the strong development of the world economy for the fourth consecutive year, with global growth of the gross national product by about 5 percent. This growth in the world economy raises the living standard as well as demand for the products of manufacturing industry.

Investments in infrastructure to meet the global demand for

electricity in a phase of growth, primarily linked to the economic growth in China, India and other parts of Asia. Energy companies around the world need to build new power grids and improve the existing ones to raise capacity.

The growing volume of trade and global competition forces manufacturing industry to become more productive, and focus has become aimed at procurement functions and line processes, among other.

The emergence of new, large markets in Asia has led to a situation where a growing portion of all expansion investment tends to be made in these countries to meet the strong demand thus created.

TYPES OF BUSINESSES IN TECHNOLOGY TRADE

There are two main business models on the technical markets: Direct sales from manufacturer to end user and sales via some kind of partner. Only a small number of global companies can reach out to all their end customers via their own channels. Large companies often choose to act on their own on a few key markets, while they seek a strong local partner on other markets. For smaller manufacturing companies, partnerships with local sales companies is often the only way to reach out to their customers.

Lagercrantz Group is a technology trading company with strong ties to its customers as well as its suppliers. The location in the supply chain is motivated by the fact that Lagercrantz Group can offer technical and business knowledge, problem-solving, localisation, combinations and systems, as well as training and

	ELECTRONICS		MECHATRONICS		COMMUNICATIONS
Area	Market position	Area	Market position	Area	Market position
Embedded systems	Leading manufacturer of marine PCs and a leading value-adding distributor of	Cable harnesses	Market-leading manufacturer of customised cable harnesses in certain segments.		Video conferencing Market-leading solutions seller of remote meeting solutions in Sweden.
Wireless industrial communication	industrial PCs for installation. Market-leading distributor of GSM modules in the Nordic Region and Poland.	Electric connection systems	Market-leading manufacturer manufacturer for the electric network electric operators in the Nordic Region.	CCTV/ Technical security	Leading systems integrator in infra-structure CCTV and in technical security solutions for high security objects.
				CAD	Sole distributor in Denmark and Norway of a world-leading solution for design software.

STRONG MARKET POSITIONS IN NICHES

service. For the buyer the technology trading company is the local link that makes world-leading technology available on a small market. For manufacturers it is a way out to small markets and ensures qualified counselling, service and after-market activities.

The subsidiaries in Lagercrantz Group are mostly active in trade on a geographically limited market. This is an important element of Lagercrantz Group's strategy, whereby the companies can operate with extensive local market knowledge and can create long-term customer relationships. The local aspect of Lagercrantz Group's model is demonstrated by the fact that an average of 80 percent of the individual company's sales are in its own country.

Trading in different forms constitutes the largest part of the Group's sales, or just under 60 percent. The trading companies are represented in divisions Electronics and Communications in particular. Trading comprises hardware as well as software for customers in several market areas and includes sales of everything from individual components to various sub-systems for integration in the products manufactured by the customers.

Some companies in the Group work with an export perspective. These are mostly companies with their own products that sell on a world market, either themselves via subsidiaries, or with the help of partners. Approximately 15 percent of the Group's revenue is sales in this form, especially in divisions Mechatronics and Electronics. The ambition is to increase this portion of sales.

Niche production makes up just over 10 percent of consolidated revenue and means that the companies manufacture special solutions for account of the customer. This type of selling is done mostly in division Mechatronics in conjunction with production of cable harnesses.

Approximately 10 percent of the Group's revenue is derived from systems integration where the companies in Lagercrantz Group undertake to deliver a complete solution, often with after-market service. This type of sales is common in an area within division Communications in particular.

THE SUPPLY CHAIN

Lagercrantz Group works with value-adding technology trade. That is why it is important for the companies in the Group to make the value-creation clearly visible to the customer. One aspect hereof is to work as close to the end customer as possible. Today about 35 percent of consolidated sales go directly to end customers. An equal proportion, or just over 35 percent of sales, goes via selling partners and resellers to end customers. Examples of such partners are installation companies, distributors and wholesalers. About 15 percent of consolidated sales go to contract manufacturers. Another important customer group is systems integrators, who account for just over 5 percent of the Group's sales.

No individual customer accounts for more than about 5 percent of the Group's sales. Even for individual subsidiaries, the

dependency on the largest customers is limited. On average, a subsidiary's 10 largest customers account for about 65 percent of that company's sales. Via its subsidiaries, Lagercrantz Group has leading market positions in a number of areas.

CHANGING PURCHASING PATTERNS

Important trends among Lagercrantz Group's customers that affect conditions for the Group are shorter lead times (timeto-market), outsourcing of certain functions and moving out production. The first two of these trends can be said to constitute positive factors, while moving out constitutes a threat to Lagercrantz Group's local sales.

Shorter time-to-market and outsourcing mean that the customers to a greater extent need to work with partners for a part of the work previously done internally. This opens opportunities for a strong technology trade company in the development phase as well as later in a product's life cycle. For the customer this means greater security since the customer can buy well-tested solutions where focus can be placed on adaptation to the customer's specific product. The customer can free up resources for marketing work and the entire supply chain is rendered more efficient.

COMPETITION

Lagercrantz Group is active on niche markets and competition is different between them depending on products, volumes and geographic scope. In general, it can be said that in technology trade there is often many alternative products and players on each market. Small local players who represent foreign manufacturers dominate on the Nordic markets. They possess a high level of knowledge about their products that may be on a par with the expertise in Lagercrantz Group. Several of the global manufacturers have their own sales organisations in the Nordic Region and can offer good service and technical competence. There are also a number of major wholesale companies with a broad product line and who distribute large volumes. Among these, specialist knowledge about individual products is not as pronounced.

CURRENCIES

A majority of the Group's sales and purchases are made in currencies other than Swedish kronor. The largest transaction currency is euro, which accounts for about 35 percent of sales and purchases. The Danish krona, the exchange rate of which is linked to euro, accounts for about 25 percent of sales and 15 percent of purchases. The American dollar is the third largest currency with about 10 percent of sales and purchases.

Major changes in recent years in the exchange rates, especially for the American dollar, have prompted more and more customers to choose to work with the euro as transaction currency. Lagercrantz works actively in trying to minimise the risk that emanates from exchange rate fluctuations by pricing in purchasing currency and by using currency clauses. Refer also to Note 41 on risk management.

Revenue by market segment

Other 17%

Revenue by market channel

Other 5%

Revenue by business type

Division Electronics

Division Electronics offers predominantly customised electronics in the niches industrial wireless communication and embedded systems. Customers are manufacturing companies, marine industry, medical technology, automation, telecommunication and other industry with stringent demands. The division has operations in Denmark, Finland, Norway, Switzerland, Great Britain, Sweden, Germany, Poland and China.

Electronics offers a line of products from world-leading manufacturers as well as proprietary products. The companies in the division offer cutting-edge knowledge in how these special components can be combined into systems that strengthen customers' offers. Electronics can reduce the customer's time-to-market by designing and delivering solutions for important functions in a newly developed product. Many of Electronics' customers pose stringent demands, often in situations where they are subject to certification and regulatory oversight, such as in the case of navigation equipment for vessels and medical/technical equipment used in health care.

2007/08 OPERATIONS

Electronics recorded a clear improvement in terms of operating profit, which increased by 65 percent, as well as operating margin, which increased to 4.9 percent from 3.1 percent. This is the result of consistent efforts towards increased value creation and focus on selected market niches. Sales developed during the year in the direction of increased project sales. This has meant a changed sales process with greater opportunities for value creation. During the year the sales organisation has therefore been developed and the sales technique was refined with focus on market knowledge and customer benefit.

The division has made inroads into new geographic markets in the Baltic States. Marketing work and sales were started during the year with bases in Finland and Poland. Sourcing services were developed at the division's office in China, in part to meet the demands from all of Lagercrantz Group's businesses.

BUSINESS DEVELOPMENT

In Norway the small company System Solution was acquired. This means an entry into a new niche that includes IT solutions for digitalisation and computerisation of health care. Over the longer term opportunities are also created to cultivate this customer segment with a broader offering.

Increased value added is a part of Lagercrantz Group's overall strategy and in division Electronics that part has been subject to focus in the business development work. Higher value added is sought in several different ways, in part by adapting the product line, in part by increasing the technical knowledge of the sales staff.

Th is is also accomplished by bringing selling to the forefront as an integrated part of the customers' product development. In the joint eff orts to fi nd the best solution, Electronics can suggest solutions of product combinations that are already developed and well-tried. Both sellers and buyers have much to gain from such an approach to selling and purchasing and it cements long-term relationships. As an element of this development the divisions in Electronics began to establish a separate competence centre with specialists in product development. Th e centre is located in Poland and works with customisation and with developing the division's own products. Customers can thereby be off ered solutions without the big expenses and lengthy development periods often associated with unique hardware.

MARKET AND STRATEGY

Electronics is active in the niche markets for industrial wireless communication and embedded systems. In wireless communication, Electronics is a leader in areas such as distribution of GSM modules. In embedded systems the division commands advanced positions in a number of areas, including marine PCs.

Th e customer base is broadened as technology becomes suffi ciently aff ordable and this also creates opportunities for new applications of the established technology and promotes the development of new technology.

Th e strategy as far as Electronics is concerned is aimed at moving the division's position in the supply chain to areas with higher specialist knowledge and unique products, and to increase the proportion of proprietary products off ered.

TRENDS AND PROSPECTS

New markets and customer groups are developed as the technology becomes more available at reasonable cost. Health care and energy are examples of sectors where Electronics sees new application areas emerge.

Th e development of world trade places new demands on the electronics manufacturers. What are needed are above all shorter development periods from concept to fi nished product for the market. Th is generates growing demand for well-tried technical solutions in vital areas such as communication between machines (M2M), network communication and positioning equipment. New markets are being developed for complete modules that can be applied directly in manufacturing of a new electronics product, or be further developed in co-operation with the customer.

New applications are constantly being developed in the electronics industry and the underlying need for industrial communication and embedded systems is believed to continue to grow.

2007/08	2006/07	2005/06
778	751	745
38	23	22
4.9	3.1	3.0

CASE World-class marine radar

Danish company Terma's surveillance radar, Scanter 4100, is built with the latest technology and is able to meet high requirements for performance and cost-effi ciency. Th e British navy has chosen to install the model on its vessels with the motivation: If there is anything out there, we must be able to see it – no matter what! Th at requirement includes movements and vessels in the air as well as on the surface of the sea. One of the major diffi culties has been to design radar with high performance at a suffi ciently low price to allow the authorities to install many vessels within the framework of their appropriations. Terma's products are built to withstand extreme conditions and to work without interruption in situations where human lives and large economic values are at stake. Lagercrantz company ISIC delivers a robust marine PC to Terma.

Division Mechatronics

Mechatronics markets systems and products in selected niches. Customers are found in industry, power generation and electricity distribution with high requirements for quality, proximity and support. Mechatronics conducts business in Denmark, Finland, Sweden, Germany and China in three areas: Production of customised cable harnesses and adjacent products and services, production and marketing of electrical connection systems, and dealing in mechanical and electro-mechanical products and electronic products.

Mechatronics' offer is aimed at two main customer categories. Dominating is Nordic manufacturing industry, especially in power generation, trains and railway, heavy vehicles and machinery, and in telecommunication. The second category is electrical network owners and electric power distribution. The specially adapted cable harnesses and electrical connection systems that the division deliver must be able to live up to the stringent requirements of customers with respect to quality and length of life. Trade in Mechatronics comprises proprietary products and complementary products from leading manufacturers. The main focus is on close customer contacts and giving customers the best possible technical advice and to offer short delivery times.

2007/08 OPERATIONS

Mechatronics recorded a positive development compared to the year before. Net revenue as well as operating profit increased, by 12 percent and 43 percent, respectively. The growth in earnings can therefore be attributed primarily to the focused efforts

to strengthen margins. The operating margin rose to 8.3 percent, from 6.5 percent.

In Finland two businesses were combined during the year with a view to improving efficiency and capacity utilisation in the organisation. In the trading operations in Sweden work to strengthen market positions in the established niches further continued successfully. The cable harness operations in Sweden continued actively to broaden the customer base in the interest of risk diversification and to reduce seasonal variations. Capacity utilisation in the Danish operations was good during the year.

Subsidiary Elpress has established itself in China. The offer will initially be aimed at existing customers in the Nordic Region with operations in China. A broadening in the direction of local players in the same segment has begun. Also in other parts of the world export ventures aimed at selected segments continued successfully.

BUSINESS DEVELOPMENT

During the year Mechatronics worked on strengthening, improving and streamlining its production apparatus. In some areas the initiative was taken for low-cost production outside the Nordic countries, primarily in eastern Europe. A partner network has been created and manufacturing has commenced of some of the division's products. Mechatronics expressed ambition is to be active throughout the supply chain and assume responsibility for quality, management, control and materials.

Mechatronics' offer has been complemented in order to develop the business in the direction of assuming greater responsibility in prioritised niches. With more complex deliveries, consisting of several products assembled in accordance with customer demands, Mechatronics' technical knowledge and broad product line does itself justice and the value added can be enhanced further. Mechatronics therefore strengthened its marketing and support organisations during the year.

Elpress has an advanced high voltage laboratory with highly competent staffing. New knowledge generated is incorporated in proprietary products and transferred to customers in the form of lectures and development in several parts of the world.

MARKET AND STRATEGY

Mechatronics is active on local markets in the Nordic countries, and here the market's performance during 2007/08 continued to be strong with good demand. The important sectors manufacturing industry, electric power distribution and generation contributed to maintaining a high level of production. The global climate issue and market demands for secure electric power distribution to the vital functions of society were driving forces behind this demand.

It is an expressed strategy to find distinct niches and to utilise the advantages this provides to the fullest. This includes developing specialist knowledge that the circle of customers can take advantage of.

TRENDS AND PROSPECTS

Customers strive to refine the production technique and to streamline and improve the processes for materials procurement. The competence in the procurement functions has been strengthened and procurement has been given higher priority in the work of corporate managements. The purchasing pattern is increasingly in the direction of industrial "lean-think" and the question posed by customers is:

– How much can you increase our efficiency this year? Mechatronics responds by offering the best balance between performance, delivery time and total cost.

Together with customers, Mechatronics has increasingly identified the functions in customer products that Mechatronics can deliver in a package – sub-system. This development entails increased value add.

Division Mechatronics	2007/08	2006/07	2005/06
Net revenue, MSEK	604	541	331
Operating profit, MSEK	50	35	15
Operating margin, %	8.3	6.5	4.5

CASE Demands for secure power supply

Society's demands for security in electrical distribution increases as a result of the effects from extreme weather conditions. Extensive new construction is under way, at the same time as older above-ground power lines are being dug down below earth's surface to be protected from the weather, and the quality requirements on the electrical connections at the plants and installations have increased markedly. The big transformers in the power supply networks requires strong connections.

For a comparatively small portion of the total investment cost, a strong and safe connection can be secured using the electrical connection systems Mechatronics' company Elpress offers. The system encompasses delivery of cable terminals and compression tools that provide a mechanically and electrically strong union with a long life.

Division Communications

Communications offers products, systems and services in the areas of digital image transmission/technical security, access products and software. The division's eight companies offer their solutions to the market based on being value-creating distributors and systems integrators. A growing portion of the division's revenue is comprised of different forms of services. The division's companies are active in Sweden, Denmark, Norway and Finland.

The division is a market leader in several areas, including video conferencing solutions in Sweden and CAD software in Denmark and Norway. The division also has a strong position in camera-based surveillance systems and other products for technical security, and in access products for telecom and broadband networks and data security.

2007/08 OPERATIONS

Net revenue increased by 16 percent and operating profit improved by 19 percent during the year. The operating margin also rose slightly and reached 6.5 percent (6.3).

The access area was what contributed most to the strong performance. Successes in the area's Finnish operations, the during the year acquired company Direktronik and a successful restructuring of the area's Swedish operations in IT/Telecom yielded results in the form of earnings as well as operating margin improvement.

The software area showed a strong development in terms of revenue. A contributing factor was a broadening of the CAD software offering to new areas.

In the area of digital image transmission/technical security restructuring was begun in one of the businesses because several major projects failed to develop according to plan. Measures taken included strengthening the company's installation capacity and aftermarket offer. Other parts of the digital image transmission/technical security business generated a stronger result, but overall earnings performance in this area was lower than last year.

BUSINESS DEVELOPMENT

Direktronik AB is part of the division since the beginning of the year. The company was very active in the area of product development and this created strong earnings growth during the year. In the field of technical security adjustments were made to the organisation whereby the focus of the business will increasingly be on project sales and aftermarket, whereas installation will be performed with the help of partners.

In the access area a continued adverse development was recorded in the area of IT security. Here the product line was modified during the year as well as the offer in efforts to find additional niches in which to be active.

CAD Kompagniet was acquired during the year and the closing took place 1 April 2008. The division has thus broadened its offer in the area of CAD solutions to include consulting.

MARKET AND STRATEGY

The market for the division's operations saw a positive development in most cases during 2007/08. In digital image transmission/technical security, software and most areas in access products growth was seen in the market niches where the division is active. The market is expected to show future growth thanks to the streamlining created by effective communication. A strong driving force is the growing exchange of information, which drives the rate of investment in IT/Telecom infrastructure. Another driving force is the trend in the direction of a more closely monitored society in the form of security and camera systems.

Irrespective of business, Lagercrantz Group has chosen a clear niche strategy with its companies, either aimed at a certain type of customer or in the form of product segmentation. The business is local in all cases, with extensive customer and market knowledge. In digital image transmission/technical security the business are niched towards larger, more complex customers/ projects where the division's technical competence and capability of offering a total package are of great value to the customer. In the area of software the division has a clear niche orientation towards CAD software. This has led to major success thanks to a strong underlying market development and a clearly marketleading position. This can now be used to broaden the business, in part into the field of consulting in the area. In the access area the division focuses on niche products for telecom operators needed for infrastructure expansion. This area also includes niched IT products and marine communications solutions.

TRENDS AND PROSPECTS

There are possibilities in several areas to strengthen the role in the supply chain, in part through in-house-developed concepts/ solutions and in part through a growing proportion of services. This work, together with acquisitions, will be the most important factors for future growth in the division. In addition hereto, a broadening of the product line and increased sales of proprietary products are another way for the division to strengthen its market position.

During the coming year the refinement work in the access business will continue. Additional focus will be placed on increasing sales to certain customer groups in video conferencing. During the year we are also expecting several major projects in infrastructure and technical security will reach the procurement stage and this is believed to have a positive effect on the division's business. The integration of CAD Kompagniet will also be an important endeavour during the year.

Revenue by business type

2007/08	2006/07	2005/06
790	682	532
51	43	28
6.5	6.3	5.3

CASE Video protects the environment

During all of 2007 the customer Sveaskog has used the Smart Meeting video service instead of letting employees travel long distances between offices for meetings. With video meeting rooms at four of their offices in Sweden, Sveaskog saves many travel days and reduces its environmental impact. For many this means less stressful work, and freeing up valuable time that can be put to better use.

Smart Meeting is a service for video meetings developed by STV. It includes a staffed help-desk that prepares each individual meeting, and provides any immediate assistance needed during a meeting. The services also includes all technology needed in a meeting room and which is required for secure communication via telephone and the internet. STV is a part of Lagercrantz Group's division Communications.

The Lagercrantz Share

The Lagercrantz share reached SEK 42.80 during July 2007. That is the highest market price since the Company was brought public in September 2001. The price performance during the 2007/08 financial year (April-March) was negative, however, by 13 percent because of a downward trend during the second half of the year. The closing share price 31 March 2008 was SEK 28.80. The broad stock market index, OMX Stockholm Price Index, fell by 22 percent over the same period and the Carnegie Small Cap Index, which reflects the overall development for smaller companies, fell by 19 percent.

Lagercrantz, with a market capitalisation of approximately MSEK 650 at the end of March 2008, is included in the Small Cap segment for companies with a market capitalisation below EUR 100 million.

PROPOSAL TO THE 2008 ANNUAL GENERAL MEETING

The dividend proposed by the Board of Directors for the 2007/08 financial year is SEK 1.50 (1.25) per share. This is equivalent to a total dividend payment of MSEK 34 (30).

The Board of Directors is also proposing cancellation of repurchased class B shares over and above the number of shares to be used to cover the Company's commitment under incentive programmes, and a renewed mandate for the Board of Directors to repurchase up to 10 percent of the shares outstanding in the Company. Repurchases shall be made via the stock exchange. The mandate is proposed to include the option of using shares held in treasury as payment for acquisitions, or to sell shares in other ways than via the stock exchange to finance acquisitions, and to cover the Company's obligation under incentive programmes.

TRADING IN THE SHARE ON THE STOCK EXCHANGE

The number of shares traded during the financial year was just short of 9.8 million (9.1) equivalent to a value of MSEK 327 (282). This is equivalent to a rate of turnover of approximately 41 percent (40). The average rate of turnover in the Small Cap segment during 2007 was 74 percent. The number of transactions per day in the Lagercrantz share was 19 (15) per trading day.

SHARE CAPITAL

As of 31 March 2008 the share capital amounted to MSEK 48.8, divided into 1,095,998 class A shares and 23,318,234 class B shares. Each share has a quotient value of SEK 2. Class A shares entitle their holders to ten votes, while class B shares entitle their holders to one vote. Both classes of shares entitle their holders to the same rights with respect to the Company's assets and earnings. The Articles of Incorporation allow for conversion of class A shares to class B shares. No shares were converted during the year.

REPURHASE OF OWN SHARES

The 2007 Annual Meeting resolved to authorize the Board of Directors to repurchase shares. During the year 1,200,000 class B shares were repurchased. Lagercrantz Group's total holding of shares in treasury was 1,936,423 class B shares, equivalent to 7.9 percent of the number of shares outstanding and 5.6 percent of the votes in Lagercrantz. 515,000 of the repurchased shares are intended to fulfil the Company's commitment under outstanding option programmes (2006 and 2007 awards), where the redemption price is SEK 36.00 and SEK 44.40, respectively, per

Market price performance and trading volume 2007/08

call option. The average acquisition price for repurchased shares is SEK 28.25 per share.

INCENTIVE PROGRAMME

Over the past several years an incentive programme has been introduced for managers and members of senior management in the Group. The purpose of the programme is to raise the motivation and create participation for managers and members of senior management regarding opportunity and risk in the Company's development. The purpose is also to motivate managers and members of senior management to continued employment in the Group. The 2006 Annual General Meeting passed a resolution for the programme, which is a recurring three-year programme based on call options for repurchased class B shares. The total number of outstanding call options issued under the programme may at no time exceed 3 percent of the total number of shares outstanding (class A as well as class B shares). The 2006 Annual General Meeting resolved to award 255,000 call options and the 2007 Annual General Meeting resolved to award 260,000 call options. Both programmes were fully subscribed. Each option gives its holder the right to purchase one share at a redemption price of SEK 36.00 (2006 programme) and SEK 44.40 (2007 programme), respectively. The options can be exercised between 20 September and 20 December 2009 (2006 programme) and 21 September 2010 and 21 December 2010 (2007 programme).

OWNERS

During the financial year Nordea fonder and Carnegie fonder became large owners of Lagercrantz Group. Anders Börjesson and Tom Hedelius are the Company's largest owners with 11.9 and 11.2 percent of the votes, respectively. Foreign ownership increased during the year, from 12.8 percent to 26.7 percent. The number of shareholders changed marginally during the year and as of 31 March 2008 Lagercrantz Group had 3,614 shareholders.

INFORMATION

Lagercrantz Group informs about important events in the Company by publishing press releases. The Company also provides financial information in the form of quarterly reports. Press releases and quarterly reports are available at the Company's website. The Company also offers interested parties to subscribe to press releases via e-mail.

The Annual Report is printed and distributed to all shareholders. The interim reports are not distributed in printed form.The following analysts follow Lagercrantz Group:

• Lars Hallström, Handelsbanken Capital Markets
• Johan Isaksson, Remium
• Henrik Alveskog, Redeye
• Christian Hellman, Kaupthing

OWNERSHIP STRUCTURE 31 MARCH 2008

of whom Swedish residents 3,453 73.3% 81.5%

	SHARE FACTS	Number of shares	Owners	Stake	Votes
		1–500	2,009	1.9%	1.3%
Short name	LAGR B	501–1,000	654	2.6%	1.8%
ID	SSE14335	1,001–10,000	812	11.9%	9.7%
		10,001–50,000	91	9.2%	7.5%
ISIN code	SE0000808396	50,001–100,000	18	6.1%	4.3%
Trading lot	500	100,001–	30	68.4%	75.4%
Segment	Small Cap	Total	3,614	100.0%	100.0%
Sector	Electronic Equipment Manufacturers	Category	Owners	Stake	Votes
Listed since	3 September 2001	Legal entities	410	61.5%	44.6%
		Individuals	3,204	38.5%	55.4%
		Total	3,614	100.0%	100.0%

LARGEST OWNERS 31 MARCH 2008

Shareholder	A shares	B shares	Stake	Votes
Anders Börjesson and family	377,982	65,000	2.0%	11.9%
Tom Hedelius and family	362,982	5,400	1.6%	11.2%
Pär Stenberg	229,152	919,222	5.1%	9.9%
Skandia Liv		2,416,741	10.8%	7.5%
Odin Fonder		1,846,000	8.2%	5.7%
Nordea Bank Finland		1,473,775	6.6%	4.6%
Brita Säve	30,000	973,982	4.5%	3.9%
Swedbank Robur Fonder		1,181,483	5.3%	3.7%
Carnegie Fonder		1,069,500	4.8%	3.3%
Johan Rapp		715,000	3.2%	2.2%
Aktia Sparbank		512,500	2.3%	1.6%
Stiftelsen för kunskaps och kompetensutveckling		400,000	1.8%	1.2%
Bernt Plotek		397,000	1.8%	1.2%
Länsförsäkringar Fonder		363,600	1.6%	1.1%
Kronprissessan Margaretas Minnesfond	17,476	100,000	0.5%	0.8%
Friends Provident International		270,000	1.2%	0.8%
Annika Wendell	15,000	100,000	0.5%	0.8%
Citibank		226,635	1.0%	0.7%
Mörner family		221,070	1.0%	0.7%
Total,19 largest owners	1,032,592	13,256,908	63.6%	72.9%
Total, other owners	63,406	8,124,903	36.4%	27.1%
Total, not including repurchased shares	1,095,998	21,381,811	100.0%	100.0%
Lagercrantz Group (shares held in treasury)		1,936,423
Total	1,095,998	23,318,234

	EVOLUTION OF SHARE CAPITAL Event	Change number	Number of shares	Proportion of capital, %	Number of votes	Proportion of votes, %
CLASS A
Opening Balance			1,840,286	7	18,402,860	41
2001/02	Conversion A to B shares	–725,464	1,114,822	4	11,148,220	29
2002/03	Conversion A to B shares	–8,320	1,106,502	4	11,065,020	29
2003/04	Cancellation of repurchased shares		1,106,502	4	11,065,020	31
2003/04	Conversion A to B shares	–4,692	1,101,810	4	11,018,100	31
2004/05	Conversion A to B shares	–4,468	1,097,342	4	10,973,420	31
2005/06	Cancellation of repurchased shares		1,097,342	4	10,973,420	32
2006/07	Conversion A to B shares	–1,344	1,095,998	4	10,959,980	32
CLASS B
Opening Balance			26,023,946	93	26,023,946	59
2001/02	Conversion A to B shares	+725,464	26,749,410	96	26,749,410	71
2002/03	Conversion A to B shares	+8,320	26,757,730	96	26,757,730	71
2003/04	Cancellation of repurchased shares	–1,950,000	24,807,730	96	24,807,730	69
2003/04	Conversion A to B shares	+4,692	24,812,422	96	24,812,422	69
2004/05	Conversion A to B shares	+4,468	24,816,890	96	24,816,890	69
2005/06	Cancellation of repurchased shares	–1,500,000	23,316,890	96	23,316,890	68
2006/07	Conversion A to B shares	+1,344	23,318,234	96	23,318,234	68

Lagercrantz Group AB (publ)

Several year overview	26
Financial reporting
Administration Report	28
Proposed Allocation of Earnings	31
Income Statement	32
Balance Sheet	33
Changes in Shareholders' Equity	35
Cash Flow Statement	36
Notes	37
Audit Report	54
Corporate Governance	55
Board of Directors and Auditors	57
Management	58

Several year overview

Years 2004/05 and later are based on IFRS; 2003/04 is based on prior accounting principles.

INCOME STATEMENT

Amounts in MSEK	2007/08	2006/07	2005/06	2004/05	2003/04
Net revenue	2,172	1,974	1,608	1,518	1,568
Operating result before depreciation and amortisation	154	120	72	23	46
Depreciation and amortisation	–23	–21	–15	–19	–19
Operating result	131	99	57	4	27
Financial income and expense	–10	–9	–2	–5	–4
Result after finance items	121	90	55	–1	23
Taxes and minority interest	–30	–25	–16	6	–9
Net result for the year	91	65	39	5	14

BALANCE SHEET

Amounts in MSEK	2008-03-31	2007-03-31	2006-03-31	2005-03-31	2004-03-31
ASSETS
Intangible non-current assets	238	225	63	38	47
Tangible non-current assets	51	83	95	92	96
Financial non-current assets	30	39	38	42	40
Other current assets	657	678	501	479	528
Liquid funds and short-term investments	79	94	55	78	138
TOTAL ASSETS	1,055	1,119	752	729	849
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity and minority interest	459	432	393	374	402
Interest-bearing provisions and liabilities	172	255	46	73	139
Non-interest-bearing provisions and liabilities	424	432	313	282	308
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	1 055	1 119	752	729	849
Capital employed	631	687	439	447	541
Pledged assets and contingent liabilities	61	61	48	58	47
CASH FLOW STATEMENT
Amounts in MSEK	2007/08	2006/07	2005/06	2004/05	2003/04
Result after finance items	121	90	55	1	23
Adjustment for paid taxes and items not included in cash flow	–19	3	–3	6	12
Cash flow before changes in working capital	102	93	52	7	35
Cash flow from changes in working capital	18	–17	34	29	37
Cash flow from operating activities	120	76	86	36	72
Cash flow from investing activities	17	–170	–45	–6	–33
Cash flow from operating activities and investing activities	137	–94	41	30	39
Cash flow from financing activities	–151	134	–65	–89	–9
Cash flow for the year	–14	40	–24	–59	30

KEY FINANCIAL INDICATORS

Amounts in MSEK unless otherwise stated	2007/08	2006/07	2005/06	2004/05	2003/04
Change in net revenue, %	10.0	22.8	5.9	–3.2	7.2
Operating margin, %	6.0	5.0	3.5	0.3	1.7
Profit margin, %	5.6	4.6	3.4	0.1	1.5
Return on capital employed, %	21	18	13	1	6
Return on equity, %	21	16	10	1	3
Equity ratio, %	44	39	52	51	47
Debt equity ratio, times	0.4	0.6	0.1	0.2	0.3
Net debt equity ratio, times	0.2	0.4	0.0	0.0	0.0
Times interest earned	9	9	14	1	4
Net interest-bearing liabilities (+)/receivables (–)	93	161	–9	–5	2
Number of employees at year-end	763	751	541	512	585
Average number of employees	769	741	551	562	595
Payroll expenses including social benefits	409	381	288	298	305
Revenue outside Sweden	1,496	1,352	1,053	941	1,071

PER-SHARE DATA

	2007/08	2006/07	2005/06	2004/05	2003/04
Number of shares outstanding at year-end ('000)	22,478	23,678	23,678	24,078	24,078
Weighted number of shares outstanding after repurchases ('000)	23,212	23,678	23,923	24,078	24,696
Operating result per share, SEK	5.64	4.18	2.38	0.17	1.09
Earnings per share, SEK	3.92	2.75	1.63	0.21	0.57
Cash flow per share, SEK	–0.60	1.69	–1.00	–2.45	1.21
Dividend per share, SEK (year's dividend as proposed)	1.50	1.25	1.00	0.75	0.90
Shareholders' equity per share, SEK	20.40	18.20	16.60	15.70	16.70
Last market price paid per share, SEK	28.80	33.50	30.10	19.50	22.60

DEFINITIONS

Return metrics are calculated based on average opening and closing capital.

AVERAGE NUMBER OF EMPLOYEES

Average number of annual employees during the year.

CASH FLOW PER SHARE

Cash flow in relation to weighted number of shares outstanding after repurchases.

CAPITAL EMPLOYED

Balance sheet total, less non-interest-bearing provisions and liabilities.

CHANGE IN NET REVENUE

Change in net revenues in percent of previous year's net revenue.

DEBT EQUITY RATIO

Interest-bearing liabilities in relation to shareholders' equity, plus minority interest.

EARNINGS PER SHARE

Net result for the year in relation to weighted number of shares outstanding after repurchases.

EQUITY RATIO

Shareholders' equity, plus minority interest in percent of balance sheet total.

NET DEBT EQUITY RATIO

Interest-bearing provisions and liabilities, less cash & cash equivalents and short-term investments in relation to shareholders' equity, plus minority i terest.

NET INTEREST-BEARING LIABILITIES/RECEIVABLES

Interest-bearing provisions and liabilities, less liquid funds and short-term investments.

OPERATING MARGIN

Operating result in percent of net revenue.

PROFIT MARGIN

Result after finance items, less share in affiliated company, in percent of net revenue.

RETURN ON CAPITAL EMPLOYED

Result after finance items, plus financial expense in percent of average capital employed.

RETURN ON EQUITY

Net result for the year in percent of average shareholders' equity.

REVENUE CHANGE

Change in net revenue in percent of preceding year's net revenue.

SHAREHOLDERS' EQUITY PER SHARE

Shareholders' equity in relation to the number of shares outstanding at year-end after repurchases.

TIMES INTEREST EARNED

Result after finance items, plus financial expense, divided by financial expense.

Administration Report

The Board of Directors and the President of Lagercrantz Group AB (publ), corporate identity number 556282-4556, hereby submit their Annual Accounts and consolidated financial statements for the operating year 2007/08.

BUSINESS

Lagercrantz Group AB (publ) and its subsidiaries is a technology trading group in electronics, electrics, communication and adjacent areas. The Group's products are distinguished by a high technology content.

The Group is active in specific product segments and with a distinct niche focus. The Group is characterised by decentralised business responsibility where each subsidiary has significant responsibility for its chosen strategy. Lagercrantz Group AB consists of some 25 subsidiaries, which are organised in three divisions: Electronics, Mechatronics and Communications.

NET REVENUE AND RESULT

The Lagercrantz Group's net revenue for the 2007/08 financial year (1 April 2007–31 March 2008) increased by 10 percent to MSEK 2,172 (1,974). The increase in revenue for comparable units was approximately 4 percent.

Order bookings showed a positive development during the year compared to the year before.

The operating margin was 6.0 percent during the financial year. Operating profit for the full year increased by 32 percent to MSEK 131 (99). This result includes a positive effect by a total of approximately MSEK 4 from items of a non-recurring nature, compared to approximately MSEK 5 during the preceding year. Not including items of a non-recurring nature, profit increased during the financial year by 35 percent.

Profit after finance items amounted to MSEK 121 (90) during the year.

Changes in foreign exchange rates affected the Group's result by approximately MSEK –2 (1) during the financial year.

The effective tax rate was 25 percent (28) and was affected by a lower corporate tax rate in Denmark than last year and the effect of capital gains on sales of real estate.

Earnings per share increased to SEK 3.92 (2.75), based on the average number of shares outstanding after repurchases.

PROFITABILITY, FINANCIAL POSITION AND CAPITAL EXPENDITURES

The return on capital employed was 21 percent during the financial year, compared to 18 percent during the preceding year. The return on equity was also stronger; 21 percent as compared with 16 percent during the preceding year.

The Group's net financial liability was MSEK 93 at the end of the period, compared with MSEK 161 at the beginning of the financial year.

Cash flow from operating activities amounted to MSEK 120 (76) during the financial year. Profit as well as working capital improvements contributed to the stronger cash flow.

Capital expenditures in non-current assets amounted to MSEK 25 (34), gross, while real estate sales had a positive effect on cash flow of MSEK 70 (25) during the year. Own shares were repurchased during the year in an amount of approximately MSEK 37 and dividends were paid in the amount of MSEK 30. A total of 1,200,000 shares were repurchased during 2007/08.

Shareholders' equity per share at the end of the period amounted to SEK 20.40, as compared with SEK 18.20 at the beginning of the financial year.

The equity ratio was 44 percent at the end of the year, as compared with 39 percent at the beginning of the financial year.

NET REVENUE AND PROFIT BY DIVISION

Electronics

Net revenue for 2007/08 amounted to MSEK 778 (751). Revenue increased in areas with higher margins, while revenue from standard components declined. Operating profit increased to MSEK 38 (23), equivalent to a margin of 4.9 percent (3.1 percent). The improvement is attributable primarily to the businesses in Denmark and Norway, where measures to improve results had effect. Also clearly visible in this division are positive effects of the work to change and develop the product lie in the direction of products with higher value added.

Mechatronics

Net revenue amounted to MSEK 604 (541). Revenue was strengthened as a consequence of a continued favourable market situation for the manufacturing units and the fact that Elpress is included for the full year as against 10 months during the preceding year. Operating profit increased to MSEK 50 (35), equivalent to an operating margin of 8.3 percent (6.5). The improvement in earnings is due to favourable capacity utilisation in the division's manufacturing units and to measures to improve margins having effect.

Communications

Net revenue amounted to MSEK 790 (682). The increase was derived from acquired units and from increased revenue in the division's software business. Operating profit during the year amounted to MSEK 51 (43), equivalent to an operating margin of 6.5 percent (6.3 percent). The result was impacted in a positive direction by acquired units and by an improved result in the division's access area. The division's digital image/technical security area recorded lower earnings than during the comparative year. Measures have therefore been taken to turn that situation around.

PARENT COMPANY AND OTHER CONSOLIDATION ITEMS

The Parent Company's internal revenue for the year amounted to MSEK 26 (24) and profit after finance items was MSEK 32 (13). This result includes exchange rate adjustments on intra-Group lending in an amount of MSEK –1 (–1) and a write-down on shares in subsidiaries in the amount of MSEK 30 (0) by reason of dividend income from subsidiaries in an amount of MSEK 81 (32). Net investments in non-current assets amounted to MSEK 0 (0).

The Parent Company has an approved credit facility in the amount of MSEK 250. MSEK 19 thereof was utilised, compared to MSEK 89 at the beginning of the financial year. The Parent Company also has a long-term acquisition credit in the amount of MSEK 78. Interest was fixed for a period of 5 years on MSEK 100 during the preceding year. In addition, the Company holds liquid funds in the amount of MSEK 0, compared to MSEK 1 at the beginning of the financial year.

EMPLOYEES

At the end of the period the number of employees in the Group was 763, which can be compared to 751 at the beginning of the period. The increase is explained by acquired businesses.

SHARES, REPURCHASES AND MAJOR SHAREHOLDERS

The share capital at the end of the period amounted to MSEK 48.8. The distribution on classes of shares is 1,095,998 class A shares, 23,318,234 class B shares, for a total of 24,414,232 shares. Class A shares entitle their holder to 10 votes per share; class B shares entitle their holder to one vote per share. The share capital shall be minimum MSEK 25 and maximum MSEK 100. The number of shares shall be minimum 12,500,000 and maximum 50,000,000. The class A share is not listed. Both share classes give the same rights with respect to the Company's assets and earnings. Each share has a quotient value of SEK 2. The Articles of Association allow for conversion of class A shares to class B shares.

The 2007 Annual Meeting resolved to authorize the Board of Directors to repurchase shares up to 10 percent of the total number of shares until the next Annual Meeting.

Repurchases shall be made via the stock exchange. The mandate included the option of using shares held in treasury as payment for acquisitions and to cover the Company's obligations under incentive programmes.

During the year 1,200,000 shares were acquired for a total of MSEK 37. Lagercrantz holds 1,936,423 class B shares in treasury, equivalent to 7.9 percent of the number of shares outstanding and 5.6 percent of the votes in Lagercrantz. Of the repurchased shares, 515,000 are intended to fulfil the Company's obligation under outstanding option programmes (awards for 2006 and 2007) where the redemption price is SEK 36.00 and SEK 44.40, respectively, per call option. The average cost of the repurchased shares amounts to MSEK 28.25 per share.

On 31 March 2008 the number of shareholders was 3,614. Two shareholders have more than ten percent of the votes: Anders Börjesson with family with 11.9 percent and Tom Hedelius with family with 11.2 percent. With 10.2 of the capital, Skandia Liv is the largest single shareholder in terms of holding.

ARTICLES OF ASSOCIATION AND CERTAIN AGREEMENTS

The Articles of Association declare that directors of the board shall be elected at the annual meeting of shareholders. The board shall comprise a minimum of three and a maximum of nine directors. There are no significant agreements to which the Company is a party that are activated or changed as a result of a change of control due to a public take-over offer.

There are no agreements between the Company and its directors or management, that entail remunerations if such person, as a result of a take-over offer, cancel his or her position with the Company.

INCENTIVE PROGRAMME

Outstanding in Lagercrantz there are 515,000 call options on repurchased class B shares issued to executives and members of senior management in the Group. During the period September– December 2009, 255,000 options may be exercised to acquire the corresponding number of shares at a price of SEK 36.00 per option. During the period September – December 2010, 260,000 may be exercised to acquire the corresponding number of shares at a price of SEK 44.40 per option.

ACQUISITIONS

Businesses acquired during the year had a net effect on revenue and profit before taxes by approximately MSEK 55 and MSEK 6, respectively.

In March 2008 it was announced that Lagercrantz had acquired the Danish company CAD Kompagniet. The closing took place on 1 April 2008.

TRANSACTION WITH CLOSELY RELATED PARTIES

Transactions between Lagercrantz and closely related parties with a significant impact on the Company's financial position and results have not occurred.

WORK OF THE BOARD OF DIRECTORS

This is described in the Annual Report, page 55.

ENVIRONMENTAL IMPACT

Responsibility for improving the environment and participating in a sustainable development is an important prerequisite for the Group's business. The Group's companies are continually working on reducing the environmental impact of their operations. Environmental work is conducted locally based on the specific conditions of each individual company. In one company the Group conducts business that requires a permit under the Swedish Environmental Act. The permit refers to "facilities for engineering industry with surface treatment." There are no known threats from an environmental viewpoint that could jeopardise the Group's operations.

RESEARCH AND DEVELOPMENT

In the interest of strengthening and developing Lagercrantz Group's position as one of the leading suppliers of solutions in electronics, electrics and communications, the Group assigns resources primarily to development of different concepts for customers and co-operation partners, and certain establishment of proprietary trademarks. Activities during 2007/08 included product development. Expenditure for research and development constitutes less than one percent of revenue. Outlays for development of certain software and development of a new product generation in embedded computing were capitalised during the year.

RISKS AND FACTORS OF UNCERTAINTY

The Lagercrantz Group's profit and financial position, as well as the future development, are affected by a number of internal factors, over which the Company exerts control, and a number of external factors where opportunities to affect the course of events are limited. The most important risk factors are the state of the economy, structural changes on the Group's markets, supplier and customer dependence, the competitive situation and financial risks. Because of the nature of Lagercrantz Group's operations, with some 25 operating subsidiaries active in several geographic markets and in different market segments, the business risks are significantly curtailed.

The economic situation

Lagercrantz is affected by the overall economic development, typically measured in terms of GDP growth. Since Lagercrantz almost exclusively sells its products and services to companies and government agencies, it is primarily these entities' capital expenditure plans that affect Lagercrantz Group. Lagercrantz Group tries to meet the risks that result from cyclical changes in the economy by sector diversification and niche focus. Sector diversification means that, seen across the entire Group, the Group's customers will find themselves in different phases of an economic cycle. As a consequence of the Group's niche focus, the Group is less dependent on one or a few end markets for its growth and profitability. This means that cyclical changes in one sector, telecom for instance, or one country, may have major impact on an individual company niched towards parts of this sector or geography, but will have less effect on the Group's overall development. Lagercrantz Group endeavours to have a growing part of its sales in the form of aftermarket sales and service revenue, which is deemed to be less sensitive to economic cycles than investment-type goods.

Structural changes

Lagercrantz Group works actively on increasing the value element in its offer, irrespective of customer group. This has clearly been a contributing reason for the Group's improved profitability, and the fact that the Group continues to be a prioritised supplier to many customers. An important part of this work has been to be more selective in choosing customers and market segments where we have an opportunity of creating a strong market position. Another structural change that affects our businesses is the ever more rapid technological development and overall shorter product life cycles. This places ever more rigorous demands on the companies to be close to the customers to catch new trends and to know when it is commercially warranted to adopt a new technology area or to phase out an existing one.

Supplier and customer dependence

Dependency on individual suppliers is one of the most important operational risks for an individual subsidiary to handle. Many of the companies in the Group have developed their business based on one or a few strong supplier relationships. If one of these were to disappear, it would hurt the company, especially in the short term before alternatives have been located. In order to minimise this risk the subsidiaries work closely with their suppliers so as to create strong relationships at multiple levels. The Group also increasingly works on analysing supplier and customer relationships based on contract structure, product liability issues and insurable risks to minimise the consequences of the loss of a supplier or customer.

Overall in the Group, there is a large number of suppliers and distribution agreements and of these some 20 are of such major economic importance that special action would be required if one or more of them were lost. No individual supplier represents more than 10 percent of the Group's aggregate sales. A number of supplier agreements expire and are added each year in the normal course of business, however.

Lagercrantz Group has a broad customer structure, split over a number of industry segments and geographic markets. No customer represents more than approximately 5 percent of the Group's aggregate sales.

Competitive situation

In general, it can be said that that the market segments where Lagercrantz is active are marked by change and increased consolidation, even if there are major variations. In the electronic industry in particular, the consolidation that swept the market in the beginning of the 2000s created pricing pressures in the field of standard components to major customers. There are nevertheless still many niches that offer good profitability, especially because the customer structure there is different, with more small and local customers. This is the type of niche where Lagercrantz Group wants to be. In other areas, where Lagercrantz Group itself is active, moves among customers led to a situation where the remaining players compete for the same customers and organic growth is low. This is the case in the wiring harness business, for instance. Here Lagercrantz Group attempts to assume a unique position through flexible production, high quality and strong customer relationships. In several other markets where Lagercrantz Group is active, market growth is so good and the degree of consolidation so low that the competitive situation allows for growth as well as improved profitability.

Seasonal variations

Lagercrantz Group's business is only to a limited degree marked by seasonal variations. Operations normally follow the seasonal pattern of the manufacturing industry, which means lower sales during holiday periods. Based on a historical pattern, just short of half of the result is generated during the first two quarters, i.e. during the period April to September, and just over half during the last two quarters of the financial year, October to March in other words. Deviations from this pattern may appear when rapid economic changes occur during a financial year.

Financial risks

For a description of the Group's and the Parent Company's financial risks, reference is made to Note 41.

ACCOUNTING POLICIES AND COMMENTS

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretation statements issued by the International Financial Reporting Interpretations Committee (IFRIC) as approved by the EU Commission for application within EU. Recommendation RR 30:05 Supplementary rules for consolidated accounting of the Swedish Financial Accounting Standards Council has also been applied.

The Parent Company applies the same accounting policies as the Group, except in the cases stated in the section "Parent Company accounting policies" in Note 1. Any discrepancies that do exist between the Parent Company's and the Group's policies are prompted by limitations in applying IFRS to the Parent Company as a result of the Swedish Annual Accounts Act (ÅRL) and the Swedish Act on securing pension obligations, and in certain cases for tax reasons.

PRINCIPLES OF COMPENSATING MEMBERS OF SENIOR MANAGEMENT

Guidelines resolved by the 2007 Annual General Meeting for compensating members of senior management are set forth in Note 6 in this Annual Report.

The proposal of the Board of Directors to the 2008 Annual Meeting for guidelines mean that compensation to the President and other members of senior management may consist of basic salary, variable compensation, pension, other benefits and financial instruments. The aggregate compensation should be adjusted to market conditions and competitive and should be commensurate with responsibility and authority. The annual variable proportion of the compensation should be maximised and never exceed the fixed salary. The variable portion should also be based on actual performance relative to set goals and on individual performance.

The retirement age shall be 60–65 years and in addition to the ITP plan, there should in the normal instance only be defined contribution pension plans. In case of termination, there may be severance pay equivalent to a maximum of one year's salary. There shall be no other share-based or share-price-based incentive programmes than the present incentive programme.

In individual cases and if special reasons exist, the Board of Directors may diverge from the above guidelines.

EVENTS AFTER THE BALANCE SHEET DATE

CAD Kompagniet A/S was acquired and possession was taken 1 April 2008. This company conducts consulting operations in the CAD area (computer-aided design) and will be interacting with the software business in this area that already exists in division Communications. CAD Kompagniet had revenue during 2007 of almost MDKK 30 with good profitability.

FUTURE DEVELOPMENT

The Group's two most important tasks for the future is to continue to raise profitability in existing operations and to continue focusing on growth, not least in the form of acquisitions.

DIVIDEND

The Board of Directors propose a dividend of SEK 1.50 (1.25) per share. The dividend is equivalent to a total of MSEK 34 (30) and constitutes 38 percent of the year's income. The size of the proposed dividend has been determined with consideration to the Group´s capital strukture and future possibilities for expansion. The Board of Directors is of the opinion that the proposed dividend leaves room for the Group to fulfil its obligations and to make the necessary capital expenditures.

PROPOSED ALLOCATION OF EARNINGS

The Board of Directors and the President propose that the funds available for distribution, SEK 316,275 thousand, be allocated as follows:

Total	316 275
To be carried forward	282 558
Dividend to the shareholders SEK 1.50 x 22,477,809 shares	33 717

BOARD ASSURANCE

The consolidated and Parent Company income statements and balance sheets will be subject to approval at the Annual Meeting to be held 1 September 2008. The Board of Directors and the CEO regard the consolidated financial statements and annual report as prepared in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the Application of International Accounting Standards and Generally Accepted Accounting Standards, and give a true and fair view of the financial position and results of operations of the Group. The annual accounts have been prepared in accordance with generally accepted accounting principles in Sweden and give a true and fair view of the financial position and results of operations of the Parent Company. The administration report for the Group and the Parent Company gives a true and fair view of the business activities, financial position and results of operations of the Parent Company and the Group, and describes the significant risks and uncertainties to which the Parent Company and the Group companies are exposed.

Stockholm 25 june 2008

Anders Börjesson Chairman

Vice Chairman

Pirkko Alitalo Tom Hedelius Lennart Sjölund

Jörgen Wigh President and CEO

Income Statement

			Group		Parent Company
Amounts in MSEK	Note	2007/08	2006/07	2007/08	2006/07
Net revenue	3,4	2 172	1 974	26	24
Cost of goods sold		–1 622	–1 490	-	-
Gross profit		550	484	26	24
Other operating revenue	7	24	24	-	-
Selling costs		–301	–275	-	-
Administrative expenses		–128	–120	–36	–38
Research and development expenses		–8	–10	-	-
Other operating expense	8	–6	–4	-	-
Operating result	3,5,6,9,10,13	131	99	–10	–14
Result from finance items
Finance income	11	7	4	86	36
Finance expense	12,13	–17	–13	–44	–9
Profit before taxes		121	90	32	13
Taxes	14	–30	–25	4	6
Net income for the year		91	65	36	19
Income attributable to
The Parent Company's equity holders		91	65
Minority interest		0	0
Net result for the year		91	65
Earnings per share, SEK		3,92	2,75
Number of shares outstanding after the year's repurchases ('000)		22 478	23 678
Weighted number of shares outstanding after the year's repurchases ('000)		23 212	23 678

Balance Sheet

		Group		Parent Company
Amounts in MSEK	Note	2008-03-31	2007-03-31	2008-03-31	2007-03-31
ASSETS	3
Non-current assets
Intangible non-current assets
Goodwill	15	140	128	-	-
Trademark	16	36	34	-	-
Other intangible assets	17	62	63	-	-
		238	225	-	-
Tangible non-current assets
Buildings, land & land improvements	18	2	38	-	-
Leasehold improvements	19	2	1	-	-
Plant and machinery	20	31	26	-	-
Equipment, tools, fixtures and fittings	21	16	18	0	0
		51	83	0	0
Financial non-current assets
Shares in Group companies	22	-	-	578	601
Due from Group companies	23	-	-	58	85
Deferred tax asset	31	26	35	6	6
Other long-term receivables	24	4	4	-	-
		30	39	642	692
Total non-current assets		319	347	642	692
Current assets
Inventories, etc.	25
Raw materials and consumables		63	62	-	-
Work in progress		12	11	-	-
Finished products and goods for resale		163	161	-	-
		238	234	-	-
Short-term receivables	33
Trade receivables	26	339	359	-	-
Due from Group companies		-	-	31	16
Earned but not invoiced revenue	27	13	34	-	-
Tax assets		11	8	0	0
Other receivables		10	26	1	1
Prepaid expenses and accrued income	28	46	17	1	1
		419	444	33	18
Short-term investments		0	0	-	-
Cash and cash equivalents	33	79	94	0	1
Total current assets		736	772	33	19
TOTAL ASSETS		1 055	1 119	675	711

Group			Parent Company
Amounts in MSEK	Note	2008-03-31	2007-03-31	2008-03-31	2007-03-31
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity	29
Share capital		49	49	49	49
Other capital contributed/Legal reserve		345	344	13	13
Reserves		5	3	-	-
				62	62
Retained earnings		–31	–29	280	313
Net profit for the year attributable to the		91	65	36	19
Parent Company's equity holders
				316	332
Total shareholders' equity attributable		459	432	378	394
to the Parent Company's shareholders Minority interest		-	0	-	-
Total shareholders' equity		459	432	378	394
Long-term liabilities	3,33,34
Long-term interest-bearing liabilities
Provisions for pensions	30	59	57	-	-
Liabilities to Group companies		-	-	67	12
Liabilities to credit institutions	34	83	96	78	88
Other long-term interest-bearing liabilities		0	0	-	-
		142	153	145	100
Long-term non-interest-bearing liabilities
Long-term non-interest-bearing liabilities		0	0	-	-
Deferred tax liability	31	29	32	-	-
Other provisions	32	3	4	-	-
		32	36	-	-
Total long-term liabilities		174	189	145	100
Current liabilities	3,33,34
Short-term interest-bearing liabilities
Committed credit facility	34	17	89	19	89
Liabilities to credit institutions	34	13	13	10	10
		30	102	29	99
Short-term non-interest-bearing liabilities
Advance payments from customers		1	1	-	-
Trade payables		219	224	1	1
Due to Group companies		-	-	100	86
Tax liabilities		12	18	-	-
Other liabilities		83	77	12	21
Accrued expenses and prepaid income	35	74	73	7	7
Provisions	32	3	3	3	3
		392	396	123	118
Total current liabilities		422	498	152	217
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES		1 055	1 119	675	711

		Group		Parent Company
Amounts in MSEK		2008-03-31	2007-03-31	2008-03-31	2007-03-31
Pledged assets
For own liabilities and provisions	34
Real estate mortgages		57	58	-	-
		57	58	-	-
Contingent liabilities	39
Guaranty undertakings, FPG / PRI		1	1	43	42
Other guarantees		3	2	4	2
		4	3	47	44

The Parent Company guarantees the pension commitments of its subsidiaries via FPG/PRI.

Changes in Shareholders' Equity

Amounts in MSEK

Group 2008-03-31	Share capital	Other con tributed capital	Hedging re serve	Translation reserve	Retained earnings	Minority in terest	Total equity
Opening balance	49	344	-	3	36	0	432
Dividend					–30		–30
Purchase of own shares					–37		–37
Net result for the year					91	0	91
Payment from option programme		1					1
Change in hedging reserve			0				0
Exchange rate differences				2			2
Closing balance	49	345	0	5	60	-	459

Group 2007-03-31	Share capital	Other con tributed capital	Translation reserve	Retained earnings	Minority in terest	Total equity
Opening balance	49	344	5	–5	0	393
Dividend				–24		–24
Net result for the year				65	0	65
Exchange rate differences			–2			–2
Closing balance	49	344	3	36	0	432

The option programme has affected equity with income in amount of 0.7 and costs in amount of 0.7, for a net of 0.

Parent Company 2008-03-31	Share capital	Legal reserve	Unrestrict ed equity	Total equity
Closing balance according to preceding year's balance sheet	49	13	332	394
Dividend			–30	–30
Purchase of own shares			–37	–37
Payment from option programme			1	1
Group contributions			19	19
Tax effect of group contributions			–5	–5
Net result for the year			36	36
Closing balance	49	13	316	378
Parent Company 2007-03-31	Share capital	Legal reserve	Unrestrict ed equity	Total equity
Closing balance according to preceding year's balance sheet	49	13	333	395
Dividend			–24	–24
Group contributions			6	6
Tax effect of group contributions			–2	–2
Net result for the year			19	19
Closing balance	49	13	332	394

The option programme has affected equity with income in amount of 0.7 and costs in amount of 0.7, for a net of 0.

Note 29 contains additional information about shareholders' equity.

Cash Flow Statement

			Group		Parent Company
Amounts in MSEK	Note	2007/08	2006/07	2007/08	2006/07
Operating activities
Profit after finance items	36	121	90	32	13
Adjustments for items not included in cash flow etc.	37	15	9	29	1
		136	99	61	14
Income tax paid		–34	–6	0	-
Cash flow from operating activities before changes in working capital		102	93	61	14
Cash flow from changes in working capital
Increase (–)/Decrease (+) in inventories		1	0	-	-
Increase (–)/Decrease (+) in operating receivables	37	16	–65	10	1
Increase (+)/Decrease (–) in operating liabilities		1	48	4	10
Cash flow from operating activities		120	76	75	25
Investing activities
Investment in businesses	38	–27	–160	–32	–174
Capital repayed from subsidiaries		-	-	17	-
Acquisitions of intangible non-current assets		–7	–13	-	-
Acquisitions of tangible non-current asset		–18	–21	0	0
Disposals of tangible non-current asset		70	25	-	-
Disposals of/decrease in financial assets		–1	–1	27	–26
Cash flow from investing activities		17	–170	12	–200
Financing activities
Repurchase of own shares		–37	-	–37	-
Dividend paid		–30	–24	–30	-24
Change in borrowings		–84	158	–27	185
Group contribution received/rendered		-	-	6	10
Cash flow from financing activities		–151	134	–88	171
Cash flow for the year		–14	40	–1	–4
Liquid funds at beginning of year		94	55	1	5
Exchange rate difference in liquid funds		–1	–1	-	-
Liquid funds at year-end		79	94	0	1

Change in net financial liability/claim	2007/08	2006/07
Net financial liability (+)/claim (–) at beginning of year	161	–9
Change in interest-bearing liabilities	–85	160
Interest-bearing liabilities in acquired businesses	-	33
Change in interest-bearing provisions for pensions	2	16
Liquid funds in acquired businesses	6	-
Change in liquid funds	9	–39
Net financial liability (+)/claim (–) at year-end	93	161

Notes

Note 1 Accounting policies

(a) Compliance with standards and law

The consolidated financial statements have been prepared in accordance with International financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and interpretation statements issued by the International Financial Reporting Interpretations Committee (IFRIC) as approved by the EU Commission for application within EU. Recommendation RR 30:06 Supplementary rules for consolidated accounting of the Swedish Financial Accounting Standards Council has also been applied.

The Parent Company applies the same accounting policies as the Group, except in the cases stated below under the section "Parent Company accounting policies." Discrepancies that do exist between the Parent Company's and the Group's policies are prompted by limitations in applying IFRS to the Parent Company as a result of the Swedish Annual Accounts Act (ÅRL) and the Swedish Act on securing pension obligations, and in certain cases for tax reasons.

(b) Assumptions for preparing the Parent Company's and the Group's financial reports

The Parent Company's functional currency is SEK, which also constitutes the reporting currency for the Parent Company and the Group. This means that the financial reports are presented in Swedish kronor. All amounts, unless otherwise specifically stated, are rounded to the nearest thousand. Assets and liabilities are reported at historical acquisition values, except for certain financial assets and liabilities which are valued at fair value. Financial assets and liabilities reported at fair value consist of derivative instruments, financial assets classified as financial assets valued at fair value via the income statement, or as available-for-sale financial assets.

Non-current assets and available-for-sale groups of disposals are reported at the lower of previously reported value and fair value, after deduction of selling expenses.

Set-off of receivables and liabilities and of revenue and costs occurs only where required or is expressly permitted in the accounting recommendation.

The financial reports encompass pages 28–53. The annual accounts of the Parent Company and the Group have been approved for publication by the Board of Directors 25 June 2008. The Group's and the Parent Company's income statements and balance sheets are subject to approval by the Annual General Meeting to be held 1 September 2008.

Preparing the financial reports in accordance with IFRS requires that management makes judgments and estimates and make assumptions that affect the application of accounting policies and the reported amounts of assets, revenue and costs. Estimates and assumptions are based on historical experience and a number of other factors that under prevailing circumstances are deemed reasonable. The result of these judgments and assumptions is then used to judge the reported value of assets and liabilities that would not be clearly evident from other sources. The actual outcome may differ from these estimates and judgments.

Estimates and assumptions are reviewed on a regular basis. Changes in estimate are reported in the period when the change is made, where the change affects this period only, or in the period when the change is made and in future periods where the change affects the current period as well as future periods.

Judgments made by management with application of IFRS with significant impact on the financial reports and estimates made that may lead to significant adjustments in the financial reports of subsequent years are described in Note 2 and elsewhere.

By events after the balance sheet date are meant favourable as well as unfavourable events that occur between the balance sheet date and the date in the next following financial year when the financial reports are signed by the members of the Board of Directors. Information is provided in the annual report about significant events after the balance sheet date that are not accounted for when the balance sheet and the income statement are adopted. Only events that confirm circumstances prevailing before the balance sheet date are taken into account at the time of adoption of the financial statements.

The stated accounting policies for the Group have been consistently applied for all periods presented in the Group's financial reports, unless otherwise specifically stated. The Group's accounting policies have been consistently applied in reporting and consolidating the Parent Company and subsidiaries.

Amended accounting policies

The new and amended standards and interpretations below have been applied in preparing these financial statements.

IFRS 7 Financial Instruments: Disclosures and amendments in conjunction therewith in IAS 1 Presentation of Financial Statements pose requirements for extensive disclosures on the importance that financial instruments have for the Company's financial position and earnings, as well as qualitative and quantitative disclosures on the character and scope of risks. IFRS 7 and the amendments in IAS 1 in conjunction therewith entail additional disclosures in the consolidated financial statements for 2007 with respect to the Group's financial goals and capital management. The standard has not given rise to any change in accounting policy, only to changes in disclosure requirements relating to financial instruments.

Early application of IFRS interpretations newly issued or revised during the 2007/2008 financial year

No newly issued IFRS or interpretations are subject to early application.

New or revised IFRS not yet applied

In management's opinion the application of newly issued or revised IFRS and interpretations will have no material effect on the Group's earnings or financial position. IFRS 8 Operating Segments defines what constitutes an operating segment and the disclosures that must be made about segments in the financial statements. The standard, which has been adopted by EU, shall be applied to financial years beginning 1 January 2009 or later.

(c) Segment reporting

A business segment is part a of the Group that is identifiable in terms accounting that either provides products or services (operating segments) or goods and services in a certain economic environment (geographic area) that is subject to risks and opportunities that differ from other segments. In accordance with IAS 14, segment information is provided for the Group only.

(d) Classification, etc.

Non-current assets and long-term liabilities in the Parent Company and the Group essentially consist only of amounts that are expected to be recovered or paid more than twelve months from the balance sheet date. Current assets and short-term liabilities in the Parent Company and the Group essentially consist only of amounts that are expected to be recovered or paid within twelve months of the balance sheet date.

(e) Principles of consolidation

(i) Subsidiaries

Subsidiaries are all entities over which Lagercrantz Group AB has a controlling influence. Controlling influence means a direct or indirect right to govern an entity's financial and operative strategies for the purpose of obtaining economic advantages. When judging whether controlling influence exists, the existence and effect of potential voting rights that are exercisable, or can be converted without delay, should be taken into consideration.

Subsidiaries are reported in accordance with the purchase method of accounting. This method means that the acquisition of a subsidiary is viewed as a transaction where the Group indirectly acquires the assets of the subsidiary and assumes its debt and contingent liabilities. The acquisition cost to the Group is determined by an acquisition analysis in conjunction with the acquisition. In this acquisition analysis the fair values of acquired identifiable assets, and assumed liabilities and contingent liabilities, are determined. The excess of the cost of acquisition of the shares in the subsidiary over the fair value of acquired assets, assumed liabilities and contingent liabilities is recorded as goodwill. A negative value is recorded directly in the income statement.

The financial reports of subsidiaries are consolidated from the time of acquisition until the date when the controlling influence ceases to exist.

(ii) Transactions eliminated in consolidation

Intra-Group receivables and liabilities, revenue or costs and unrealised gains or losses arising in intra-Group transactions between Group companies are eliminated in their entirety when preparing the consolidated financial statements.

(f) Foreign currency

(i) Transactions in foreign currency

Transactions in foreign currency are restated to the functional currency using the rate of exchange prevailing on the day of the transaction. Monetary assets and liabilities in foreign currency are converted to the functional currency at the rate of exchange prevailing on the balance sheet date. Foreign exchange rate differences that arise in conversion are accounted for in the income statement. Non-monetary assets and liabilities reported at historical acquisition values are converted at the rate of exchange prevailing at the time of the transaction. Non-monetary assets and liabilities reported at fair value are converted to the functional currency at the rate of exchange prevailing at the time of fair value valuation. The exchange rate change is then reported in the same manner as other changes in value.

(ii) Financial reports of foreign entities

Assets and liabilities in foreign entities, including goodwill and other surplus values and impairment arising in consolidation, are converted to Swedish kronor at the rate of exchange prevailing on the balance sheet date. Revenue and costs in a foreign entity are converted to Swedish kronor at the average rate of exchange. Translation differences arising as a result of currency conversion in foreign entities and the resultant effects of hedging of net investments are reported directly to the translation reserve in equity. When foreign entities are sold, the accumulated translation differences attributable to the entity are realised directly in the income statement, after deduction of any hedging. With respect to its foreign entities, Lagercrantz Group elected to set to zero the accumulated translation differences attributable to the time before 1 April 2004, i.e. the time for adopting IFRS.

(g) Revenue recognition

(i) Sale of goods

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Revenue from the sale of goods is reported in the income statement when significant risks and rewards associated with ownership of the goods have been transferred to the buyer, i.e. typically in connection with delivery. If the product requires installation at the buyer, and the installation constitutes a significant part of the delivery, revenue is recognised when the installation is completed. Revenue is not recognised in cases where it is probable that the economic rewards will not inure to the benefit of the Group.

(ii) Revenue from the sale of real property

Revenue from the sale of real property is normally recorded on the closing date, unless risks and rewards have been transferred to the buyer on an earlier occasion.

(iii) Service assignments

Revenue from service assignments is normally reported when the service is performed. Revenue from service assignments of the service and maintenance agreements type is reported in accordance with the principles for so-called gradual revenue recognition. The degree of completion is normally determined based on the relationship between sunken expenditure on the balance sheet date and the estimated total expenditure. In certain companies recorded time is used as a basis for degree of completion. A probable loss is accounted for immediately in the consolidated income statement.

(iv) Rental income

Rental income from real properties is reported on a straight-line basis in the income statement based on the terms of the lease. The aggregate cost of benefits provided is reported as a reduction of rental income on a straight-line basis over the term of the lease.

(v) Government grants

Government grants are reported in the balance sheet as prepaid income when there is reasonable assurance that the grant will be received and that the Group will be able to fulfil the conditions associated with the grant. Grants are systematically assigned to the right periods in the same way and over the same periods as the costs the grants are intended to compensate for. Government grants related to assets are reported as a reduction of the reported value of the asset.

(h) Operating expenses and finance income and expenses

(i) Payments related to operating leases

Payments related to operating leases are reported on a straight-line basis in the income statement. Benefits received in connection with signing a contract are reported as a part of the total leasing cost in the income statement.

(ii) Payments related to financial leases

The minimum leasing fees are allocated to interest expense and repayment of the outstanding liability. The interest expense is distributed over the leasing period in such a way that each accounting period is charged with an amount equivalent to a fixed rate of interest for the liability reported during the respective period. Variable fees are expensed in the periods when they arise.

(iii) Finance income and expenses

Finance income and expenses consist of interest income on bank balances, receivables and interest-bearing securities, interest expense on loans, dividend income, exchange rate differences, change in value of financial assets valued at fair value via the income statement, impairment losses on financial assets and gains and losses on hedging instruments accounted for in the income statement.

Interest income on receivables and interest expense on liabilities are calculated using the effective rate method. The effective rate is the interest rate that is the present value of all estimated future payments during the expected period of fixed interest that equals the reported value of the receivable or the liability. The interest component of financial lease payments is reported in the income statement using the effective rate method. Interest income includes accruals and deferrals of transaction costs and any rebates, discounts, premiums and other differences between the original value of the receivable and the amount received at maturity.

Interest expense includes accrued and deferred amounts of issuing costs and similar direct transaction costs in connection with raising loans.

The Group and the Parent Company do not capitalise interest in the acquisition cost of assets. Dividend income is reported when the right to receive payment has been determined.

(i) Financial instruments

Financial instruments are valued and reported in the Group in accordance with the rules in IAS 39. Financial instruments reported among assets in the balance sheet include cash and cash equivalents, accounts receivables, advance payments to suppliers and derivatives. Liabilities include accounts payables, loan liabilities, advance payments from customers and derivatives.

Reporting in and removal from the balance sheet

A financial asset or a financial liability is recorded in the balance sheet when the company becomes party to the contractual terms of the instrument in question. Trade receivables are recorded in the balance sheet when an invoice has been sent out. A liability is recorded when the counterparty has performed and a contractual obligation exists to pay, even if an invoice has not been received. Trade payables are recorded when an invoice has been received. A financial asset is removed from the balance sheet when the rights in the contract are realised, fall due or the company loses control over it. The same holds true for a part of a financial asset. A financial liability is removed from the balance sheet when the obligation in the contract is fulfilled, or when the liability is extinguished in some other way. Acquisition and disposal of financial assets are reported on the transaction date.

Valuation

Financial instruments that are not derivatives are initially valued at acquisition cost, equivalent to the fair value of the instrument. A financial instrument's classification determines how it is valued after the first recording occasion. IAS 39 classifies financial instruments in categories based on the original purpose of the financial instrument. The categories below are relevant for the Group:

Financial assets valued at fair value via the income statement, Loans and trade receivables, Financial liabilities valued at fair value via the income statement, Other financial liabilities and Derivative instruments used for hedge accounting.

Financial assets valued at fair value via the income statement

This category consists of two sub-groups: financial assets held for trading and other financial assets that the Company initially has chosen to place in this category (in accordance with the so-called Fair Value Option). Financial instruments in this category are valued on an ongoing basis at fair value with the change in value in the income statement. The first sub-group includes derivative instruments with a positive fair value with the exception of derivative instruments which are an identified and effective hedging instrument.

Loans and trade receivables

Loans receivable and trade receivables are non-derivative assets with fixed payments or with payments that can be determined, and which not are listed on an active market. Receivables arise when companies provide funds, goods or services directly to a customer without intention of trading in the receivable that arises. They are included in current assets, with the exception of items that mature later than 12 months after the balance sheet date, which are classified as non-current assets. Loan receivables and trade receivables include items Trade receivables and Other receivables in the balance sheet. Assets in this category are valued at accrued acquisition value. Trade receivables are carried at the amount expected to be collected, i.e. after a deduction for doubtful credits. Impairment losses are reported as part of operating expenses.

Financial liabilities valued at fair value via the income statement

This category consists of financial liabilities held for trading and derivative instruments not used for hedge accounting. Liabilities in this category are valued on an ongoing basis at fair value with the change in value in the income statement.

The Group held no material instruments belonging to this category during the financial year.

Other financial liabilities

Financial liabilities not held for trading are valued at accrued acquisition value. The Group's loan liabilities, financial lease liabilities, trade payables and advance payments from customers belong to this category.

Derivatives used for hedge accounting

All derivative instruments are accounted for at fair value in the balance sheet. Changes in value are accounted for in the income statement in the case of actual hedge accounting. Hedge accounting is described in greater detail below, under Derivative instruments and hedge accounting.

Cash and cash equivalents

Cash and cash equivalents consist of cash and immediately available balances with banks and equivalent institutions, and short-term liquid investments with a term to maturity of less than three months, exposed to minimal risk for fluctuation in value.

Financial investments

Financial investments are classified either as non-current assets or short-term investments depending on the purpose of the holding. Where the term or the expected holding period is more than one year, they are classified as non-current assets.

(j) Derivative instruments and hedge accounting

Derivative instruments are primarily acquired by the Group to reduce interest, foreign exchange rate exposure and transaction exposure. Built-in derivatives should be accounted for separately, unless they are not closely related to the host contract. Derivative instruments are originally accounted at fair value meaning that transaction costs are affecting the earnings in the period. After the initial accounting, the instrument is valued at fair value and changes accounted for in line with what is stated below.

To fulfil the demands for hedge accounting as stated in IAS 39, there must be a close connection to the hedged item. Further, the hedge must effectively protect the hedged item, documentation must be established and it must be possible to measure the effect of the hedge. Gains and losses in hedges are accounted for at the same time as gains and losses for the hedged items.

Fixed interest rate hedging – cash flow hedging

Interest rate swaps are used to hedge against the uncertainty of future interest rate flows relating to loans at variable rates. Interest rate swaps are valued at fair value in the balance sheet. In the income statement the interest coupon part is recorded on a current basis as interest income or interest expense. Other changes in value of the interest rate swap are directly to the hedging reserve in equity until the hedged item affects the income statement and as long as the criteria for hedge accounting and effectiveness are fulfilled.

Receivables and liabilities in foreign currency

Forward contracts can be used for hedging an asset or a liability against foreign exchange rate risk. For such hedging no hedge accounting is required since the hedged item as well as the hedging instrument is reported at fair value via the income statement with respect to foreign exchange rate differences. Changes in value of operations-related receivables and liabilities are recognised in the operating result, while changes in value of financial receivables and liabilities are reported in net finance items.

Net investments

Investments in foreign subsidiaries (net assets including goodwill) have been partially hedged by raising loans in the corresponding currency. Such loans are translated at the period-end rate of exchange at the time of closing of the books. Exchange rate differences recognised in the Parent Company are eliminated in the consolidated financial statements against conversion of net assets in subsidiaries carried directly to equity.

(k) Tangible non-current assets

(i) Owned assets

Tangible non-current assets are reported as assets in the balance sheet if it is probable that future economic advantages will inure to the Company's benefit and the acquisition value of the asset can be calculated in a reliable manner.

Tangible non-current assets are reported in the Group at acquisition value, less accumulated depreciation and any impairment losses. The acquisition value includes the purchase price and costs directly attributable to the asset to bring it to location and make it usable for the purpose intended with its procurement. Examples of costs directly attributable included in the acquisition value are costs for shipping and handling, installation, legal ratification, consulting services and legal services.

Tangible non-current assets that consist of parts with different periods of utilisation are treated as separate components of tangible non-current assets.

The reported value of a tangible non-current asset is removed from the balance sheet upon disposal or sale, or when no future economic benefits are expected to be derived from use or disposal/sale of the asset. Gains or losses that arise upon sale or disposal of an asset are defined as the difference between the selling price and the reported value of the asset, less direct selling expenses. Gains and losses are recognised as other operating income/expense.

(ii) Leased assets

IAS 17 is applied to leased assets. Leases are classified either as financial or operating leases. Leases where substantially all of the economic risks and rewards associated with ownership have been transferred to the lessee are classified as financial leases. Where that is not the case, the lease is an operating lease.

Assets rented under financial leases are reported as assets in the balance sheet. The leased assets are depreciated according to plan, whereas lease payments are reported as interest and repayment of debt.

In the case of operating leases the lease payment is expensed over the term of the lease based on usage, which may vary from what has actually been paid as leasing fees during the year.

(iii) Additional expenditure

Additional expenditure is added to the acquisition value only to the extent it is probable that the future economic benefits associated with the asset will inure to the benefit of the company and the acquisition value can be calculated in a reliable manner. All other additional expenditure is recognised as an expense in the period when it arises.

(iv) Depreciation principles

Assets are depreciated on a straight-line basis over their estimated period of use. Land is not depreciated. The Group applies component depreciation, which means that depreciation is based on the estimated period of use of individual components.

Estimated periods of use

15−50 years
3−10 years
3−5 years

Property used in operations consists of a number of components with varying periods of use. The main classification is buildings and land. The land component is not depreciated since its period of use is considered to be unlimited. Buildings, however, consist of a number of components the period of use of which varies.

The periods of use have been deemed to vary between 15 and 50 years for these components.

(l) Intangible assets

(i) Goodwill

Goodwill represents the difference between the acquisition value for an acquisition and the fair value of the acquired assets, assumed debt and contingent liabilities.

In adopting IFRS, the Group has applied IFRS retroactively to goodwill in acquisitions after 1 August 2002 and before 1 April 2004. The classification and accounting procedures of acquisitions before 1 August 2002 have not been re-assessed in accordance with IFRS 3 when preparing the consolidated opening balance in accordance with IFRS as 1 April 2004.

Goodwill is valued at acquisition cost, less any accumulated impairment losses. Goodwill is distributed to cash-generating units and is no longer amortised, but instead tests are performed on an annual basis to determine if assets have suffered any impairment. (Refer to Accounting policies (n)).

For acquisitions where the acquisition cost is less than the net value of acquired assets and assumed debt and contingent liabilities, the difference is carried directly to the income statement.

(ii) Research and development

Expenditure for research and development aimed at obtaining new scientific or technological knowledge is reported as costs as incurred.

Expenditure for development, where the research result or other knowledge is applied to achieve new or improved products or processes, is reported as an asset in the balance sheet, if the product or the process is technically or commercially usable and the company has sufficient resources to complete the development and then utilise or sell the intangible asset. The reported value includes expenditure for material, direct expenditure for salaries and indirect expenditure attributable to the asset in a reasonable and consistent manner. Other expenditure for development is reported as costs directly in the income statement as incurred. Development costs reported in the balance sheet are carried at acquisition value, less accumulated amortisation and any impairment losses.

(iii) Other intangible assets

Other intangible assets acquired by the Group are reported at acquisition value, less accumulated amortisation and impairment losses. Also included here are capitalised IT expenditure for development and purchase of software. Sunk costs for internally generated goodwill and internally generated trademarks are reported in the income statement when the cost is incurred.

(iv) Additional expenditure

Additional expenditure for capitalised intangible assets is recorded as an asset in the balance sheet only to the extent it increases the future economic benefits for the specific asset to which it is attributable. All other expenditure is expensed as incurred.

(v) Amortisation

Amortisation is recorded in the income statement on a straight-line basis over the estimated period of use of intangible assets, unless such periods of use are indefinable. Goodwill, trademarks and intangible assets with an indefinable period of use are tested on an annual basis for any impairment suffered, or as soon as there are indications that the asset in question has suffered a loss of value. Intangible assets subject to amortisation are amortised from the date when they are available for use.

Estimated periods of use

Patents, innovations and customer relationships	5−20 years
Capitalised development expenditure and software	3−7 years

(m) Inventories

Inventories are valued at the lower of acquisition value and net realisable value. Net realisable value is the estimated selling price in current operations, after deduction of estimated costs for completion and for accomplishing a sale.

The acquisition value of inventories is calculated by applying the first-in first out method (FIFO) and includes expenditure arising at the acquisition of the inventory assets and transportation thereof to their current location and state. For manufactured goods and work in progress, the acquisition value includes a reasonable portion of indirect costs based on normal capacity.

(n) Impairment losses

The reported value of the Group's assets is tested on each balance sheet date with a view to determining if any impairment has been suffered. IAS 36 is used for impairment tests of assets other than financial assets where IAS 39 is used, for available-for-sale assets where IFRS 5 is used, inventories, assets under management used for financing compensation to employees and deferred tax claims.

The value of exempted assets as above the valuation is tested in accordance with each respective standard.

Where there is an indication of a need for an impairment charge, the recoverable value of the asset is calculated. The recoverable value of goodwill, intangible assets with indefinite usage and intangible assets not yet ready for use is calculated annually.

Where it is not possible to allocate essentially independent cash flows to an individual asset, assets are grouped to the lowest level where essentially independent cash flows can be determined (a so-called cash-generating unit) for purposes of testing whether impairment has been suffered. An impairment loss is recorded when an asset's or a cash-generating unit's value exceeds the recovery value. An impairment loss is charged to the income statement.

Impairment losses of assets attributable to a cash-generating unit are in the first instance allocated to goodwill. Proportional impairment charges are then made against other assets in the unit.

The recoverable value is the higher of fair value, less selling costs and the value in use. When calculating the value in use future cash flows are discounted using a discount factor equivalent to risk-free interest and the risk associated with the specific asset.

(i) Impairment of financial assets

The recoverable value of assets belonging to the categories held-to-maturity investments, loans and trade receivables are reported at accrued acquisition value is calculated as the present value of future cash flow discounted using the effective rate of interest prevailing when the asset was first accounted for. Assets with short remaining term are not discounted. An impairment loss is recorded as a cost in the income statement.

(ii) Reversal of impairment losses

Impairment charges against held-to-maturity investments, or loans and accounts receivable reported at accrued acquisition value, are reversed if a later increase of the recovery value can objectively be attributed to an event that occurred after the impairment was charged.

Impairment charges against goodwill are not reversed. Impairment charges against other assets are reversed if there is a change in the assumptions used for calculating the recoverable value.

An impairment charge is reversed only to the extent the reported value of the asset after the reversal does not exceed the value the asset would have had if no charge impairment had been charged, taking into account the amortisation that would then have been made. Impairment losses against goodwill are not reversed.

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(o) Shareholders' equity

The Group's equity can be divided into share capital, other capital contributed, reserves, retained earnings and minority interest.

(i) Repurchase of own shares

The holding of own shares in treasury and other equity instruments are reported as a reduction of shareholders' equity. The acquisition of such instruments is reported as a deduction item against shareholders' equity. Proceeds from the sale of equity instruments are reported as an increase in shareholders' equity. Any transaction costs are carried directly to equity.

(ii) Dividends

Dividends are reported as a liability after the General Meeting has approved the dividend.

(iii) Earnings per share

Earnings per share is based on net income attributable to the parent company equity holders and the weighted average numbers of shares outstanding during the year. When calculating earnings per share after dilution, the average number of shares outstanding is adjusted to take into account any effects of the dilutive effect of common shares, which during the period under review is attributable to options issued to the employees. The dilutive effect of options affects the number of shares outstanding and arises only when the redemption price is lower than the market price of the share.

(p) Employee benefits

(i) Defined contribution plans

Obligations relating to fees for defined contribution plans are reported as an expense in the income statement when it occurs.

(ii) Defined benefit plans

The Group's net obligations relating to defined benefit plans are calculated separately for each plan through an estimate of the future compensation that the employee has earned as a result of his/her employment in both the current and prior periods.

The calculations are performed by a qualified actuary using the so-called projected unit credit method. Commitments are then valued at the present value of expected future payments with due consideration to future pay increases. The discount rate used is the interest on the balance sheet date on an investment grade corporate bond with a term equivalent to the Group's pension commitments. When there is no active market for such corporate bonds, the market rate for government bonds with an equivalent term is used. In the cases of funded plans, the fair value of managed assets reduces the calculated value.

When the calculation leads to an asset for the Group, the reported value of the asset is limited to the net of unreported actuarial losses and unreported costs for service during prior periods and the present value of repayments from the plan, or reduced future payments into the plan.

When the benefits under a plan are improved, the proportion of the increase in benefits pertaining to the employee's service during prior periods is reported as a cost in the income statement, distributed on a straight-line basis over the average period until the benefits are fully vested. Where the benefits are fully vested, the cost is reported in the income statement directly.

All actuarial gains and losses as of 1 April 2004, the date for adoption of IFRS, have been reported. The so-called corridor rule is applied for actuarial gains and losses arising when the Group's obligations for different plans are calculated after 1 April 2004. Under the corridor rule, the portion of the accumulated actuarial gains and losses that exceed 10 percent of the greater of the obligations' present value and the fair value of managed assets is reported in the result over the expected average remaining employee service period of the employees covered by the plan. No other actuarial gains and losses are taken into account.

Obligations for retirement pension to salaried employees in Sweden in accordance with the ITP plan are handled mainly within the so-called FPG/PRI system. Obligations for family pensions are secured by insurance in Alecta, however. These obligations are also of the defined benefit type, although the Company has not had access to the information necessary to report these obligations as a defined benefit plan. These pensions secured by insurance in Alecta are therefore reported as defined contribution plans. At the end of 2007, Alecta's surplus in the form of collective solvency margin was 152 percent (2006: 143 percent). The collective solvency margin is defined as the market value of Alecta's assets in percent of the insurance commitments calculated in accordance with Alecta's actuarial calculation assumptions, which do not correspond to IAS 19. Alecta's surplus can be distributed to the policy holders or the insured.

When there is a difference between how the pension cost is determined in a legal entity and a group, a provision or a receivable is reported relating to special payroll tax based on this difference. Such provision or receivable is not subject to present value calculation. The net of interest on pension liabilities and the expected return on the associated managed assets is reported in the net finance item. Other components are reported in operating earnings.

(iii) Benefits in case of termination

A cost for compensation in connection with termination of personnel is reported only where the company is demonstrably obligated, without a realistic opportunity for retraction, by a formal detailed plan to terminate an employment before the normal point in time. When compensation is given as an offer to encourage voluntary termination, a cost is reported where it is probable that the offer will be accepted and the number employees who will accept the offer cab be reliably estimated.

(iv) Option Programme

The Group's call option programme enables members of senior management to acquire shares in the Company. The employees have paid a market valuated premium for this opportunity. The programme contains a subsidy which states that the employee receives the equivalent as the premium paid in the form of salary. Payment of the subsidy is proposed to be paid two years after the issue resolution provided that the option holder is still in the employment of the Group at this point of time and still owns purchase options. This subsidy, including social cost, is distributed as administrative expense over a two year vesting period.

(q) Provisions

A provision is reported in the balance sheet where the Company has a formal or informal legal obligation as a consequence of a transpired event and where it is probable that an outflow of economic resources will be required to settle the obligation, and an accurate assessment of the amount can be made. Where the effect of the timing of the payment is significant, provisions are calculated based on discounting the expected future cash flow at an interest rate that reflects current market assessments of the time value of money and, where applicable, the risks associated with the obligation.

(i) Warranties

A provision for warranties is reported when the underlying products or services are sold. The provision is based on historical data on warranties and compilation of possible outcomes in relation to the probabilities associated therewith.

(ii) Restructuring

A provision for restructuring is reported when the Group has adopted a comprehensive and formal restructuring plan, and the restructuring has either begun, or been publicly announced. No provisions are set aside for future operating costs.

(iii) Loss contracts

A provision for loss contracts is reported when the anticipated benefits that the Group expects to receive from a contract are lower than the inevitable costs to fulfil the obligation or contract.

(r) Taxes

Income taxes consist of current taxes and deferred taxes. Income taxes are reported in the income statement, except when the underlying transaction is reported directly against equity, in which case the associated tax effect is also reported against equity.

Current taxes are taxes to be paid or refunded relating to the current year, with application of the tax rates resolved, or in practice resolved, as of the balance sheet date. Also included are adjustments of current taxes attributable to prior periods.

Deferred taxes are calculated in accordance with the balance sheet method based on temporary differences between reported values and values for tax purposes of assets and liabilities. The following temporary differences are not taken into account: Temporary difference arising upon first recording of goodwill, first recording of assets and liabilities that are not acquisition of a business, and at the time of the transaction do not affect either the reported result or the result for tax purposes. Also not accounted for are temporary differences attributable to shares in subsidiaries and associated companies not expected to be reversed within the foreseeable future. The valuation of deferred taxes is based on how the reported values of assets or liabilities are expected to be realised or settled. Deferred taxes are calculated using the tax rates and tax rules resolved, or in practice resolved, as of the balance sheet date.

Deferred tax assets relating to deductible temporary differences are reported only to the extent that it is probable that it will be possible to utilise them. The value of deferred tax assets is reduced when it no longer is deemed probable that it will be possible to utilise them.

(s) Contingent liabilities

A contingent liability is reported when there is a possible undertaking emanating from events that have occurred and the existence of which are confirmed only by the occurrence of one or more future uncertain events, or when there is an undertaking not reported as a liability or provision because it is unlikely that an outflow of resources will be required.

(t) Cash flow statement

Payments have been divided into categories: current operations, investing operations and financing operations. The indirect method is used for flows from current operations.

The year's changes of operating assets and operating liabilities have been adjusted for effects of exchange rate differences. Acquisitions and disposals are reported in investing operations. The assets and liabilities held by the entities acquired and sold at the time of change are not included in the statement of changes in working capital, nor are changes of balance sheet items reported in investment and financing operations.

Liquid funds include cash and bank flows and also short-term investments, the conversion to bank balances can occur at a beforehand essentially known amount. Liquid funds include short-term investments with a term of less than three months.

Statements issued by the Emergency Task Force of the Swedish Accounting Standards Council for listed companies apply.

(u) Parent Company accounting policies

The Parent Company has prepared its annual accounts in accordance with the Swedish Annual Accounts Act (1995:1554) and recommendation RR 32:06 Accounting for legal entities of the Swedish Financial Accounting Standards Council. RR 32:06 means that the Parent Company in the annual accounts for the legal entity should apply all IFRS and statements of EU to the greatest extent possible within the framework of the Swedish Annual Accounts Act and with due regard to the relationship between accounting and

1 2 3

taxation. The recommendation sets out which exceptions and additions that are to be made from IFRS.

In all, this results in differences between the Group's and the Parent Company's accounting in the areas indicated below.

Classification and forms of presentation

The Parent Company's income statement and balance sheet are presented in accordance with the schedules of the Swedish Annual Account Act. The difference to IAS 1 Presentation of Financial Statements applied to the presentation of the Group's financial statements is primarily the reporting of financial income and expense, non-current assets and equity.

Subsidiaries

Shares in subsidiaries are reported in the Parent Company in accordance with the purchase method of accounting. Dividends received are reported as revenue only to the extent they originate from profit earned after the acquisition. Dividends that exceed such earned profit are regarded as a repayment of the investment and reduces the reported value of the share.

Revenue

Financial instruments and hedge accounting

Owing to amended rules in the Swedish Financial Accounting Standard Board's recommendation RR 32 and the relationship between accounting and taxes, the rules for financial instruments and hedge accounting in IAS 39 are not applied in the Parent Company as a legal entity.

Anticipated dividends

Anticipated dividends from subsidiaries are reported in those cases when the Parent Company alone has the right to decide on the size of the dividend and the Parent Company has decided on the size of the dividend before publication of its financial reports.

Tangible non-current assets

Owned assets

Tangible non-current assets in the Parent Company are carried at acquisition value after deduction of accumulated depreciation and any impairment losses in the same way as the Group, but with any write-ups added.

Leased assets

In the Parent Company all lease contracts are reported in accordance with the rules for operating leases.

Taxes

In the Parent Company, untaxed reserves are reported including deferred tax liability. In the consolidated financial statements, on the other hand, untaxed reserves are divided into deferred tax liability and equity.

(v) Group contributions and shareholder contributions for legal entities

The Company reports group contributions and shareholder contributions in accordance with the statement of the Emerging Issues Task Force of the Swedish Financial Accounting Standards Council. Shareholder contributions are carried directly to the recipient's equity and are capitalised in the form of shares with the donor, to the extent an impairment charge is not called for. Group contributions are reported according to economic purpose. This means that group contributions rendered for the purpose of minimising the Group's total taxes are carried directly to retained earnings after deduction of their current tax effect.

Group contributions in lieu of dividends are reported as dividends. This means that a group contribution received, and its current tax effect, are reported via the income statement. Group contributions rendered and their current tax effect are carried directly to retained earnings.

Group contributions in lieu of shareholder contributions are reported by the recipient directly against retained earnings, taking the current tax effect into account. The donor reports the group contribution and its current tax effect as an investment in shares in group companies, to the extent an impairment charge is not necessary.

(x) Mergers

Mergers are accounted for in accordance with BFNAR 1999:1.

(y) Financial guarantees

Lagercrantz group has chosen not to use the recommendations in IAS 39 regarding financial guarantees for subsidiaries in accordance with RR32:06.

Note 2 Critical estimates and judgments

The Board of Directors and management has discussed the development, the choice of and disclosures relating to the Group's important accounting policies and estimates, and the application of these policies and estimates. Certain critical accounting estimates performed in conjunction with application of the Group's accounting policies are described below.

Test for impairment of goodwill

Each year the Group investigates if any impairment of goodwill has occurred. The recoverable value of the cash-generating units is determined through a calculation of the value in use. This calculation is based on the strategic plan of the business in question and expected future cash flows for the operation. The discount factor used for present value calculations of expected future cash flows is the weighted capital costs (WACC). The year's review has demonstrated that there is no need for an impairment charge.

Deferred taxes

The value of tax loss carryforwards and other deferred tax claims/liabilities is taken into consideration to the extent that it is deemed probable that it will be possible to utilise them in the future.

Pension assumptions

Pension assumptions are an important element of the actuarial methods used to measure pension obligations and they can have an effect on the reported pension liability and the annual cost of pensions. Two critical assumptions − the discount rate and expected return on managed assets − are important for measuring the year's pension cost as well as the present value of the defined benefit pension obligations. These assumptions are assessed at least once per year for each plan in each country. Other assumptions may relate to demographic factors, such as retirement age, mortality and personnel turnover, are not reviewed as often. The current outcome often differs from the actuarial assumptions for economic and other reasons. The discount rate makes it possible to measure future cash flows at present value at the time of measurement. This interest rate should correspond to the return on investment grade corporate bonds, or government bonds, if a functioning market for corporate bonds does not exist. A lowered discount rate increases the present value of the pension liability and the annual cost.

Note 3 Segment reporting

Segment reporting is drawn up for the Group's lines of business and geographic areas. The Group's internal reporting system is based on follow-up of the return on the Group's goods and services, which makes lines of business the primary basis of division. The segments' results, assets and liabilities are included in directly attributable items, as well as items that can be allocated to the segments in a reasonable and reliable manner. The segments' investments in non-current assets include all capital expenditure, i.e. in intangible as well as tangible assets. Assets added as a result of acquisitions are not included. Amortisation of Group surplus values is included, however. The segment reporting does not include receivables and liabilities relating to taxes or intra-Group transactions.

Lines of business

Lines of business are the Group's primary segment.

The Group consists of the following lines of business:

• Division Electronics: Sells special components and solutions in electronics.
• Division Mechatronics: Conducts niche production of cable harnesses, electric connection systems and similar products.
• Division Communications: Operates within IT-related areas, such as Digital Image/ technical security, Access and Software

Geographic areas

Geographic areas constitute the Group's secondary segment. Information presented about assets of the segments and the period's capital expenditures in tangible and intangible non-current assets is based on geographic areas grouped according to where the assets are located.

Revenue and result by line of business

	Electronics		Mechatronics			Communications
	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07
Revenue
External sales	778	751	604	541	790	682
Internal sales	15	18	5	6	-	0
Total revenue	793	769	609	547	790	682
Operating result	38	23	50	35	51	43

Revenue and result by line of business (continued)

		Parent Company and eliminations
	2007/08	2006/07	2007/08	Total 2006/07
Revenue
External sales	-	-	2,172	1,974
Internal sales	–20	–24	-	-
Total revenue	–20	–24	2,172	1,974
Operating result	–8	–2	131	99
Financial income			7	4
Financial expense			–17	–13
Result before taxes			121	90
Taxes and minority interest			–30	–25
Net result			91	65

Transfer pricing between lines of business is on market terms.

Other disclosures by line of business

		Electronics		Mechatronics		Communications
	2007/08	2006/07	2007/08	2006/07	2007/08	2006/07
Assets	322	330	335	332	349	325
Undistributed assets	-	-	-	-	-	-
Total assets	322	330	335	332	349	325
Liabilities	116	117	110	127	156	143
Undistributed liabilities	-	-	-	-	-	-
Total liabilities	116	117	110	127	156	143
Capital expenditure	8	6	13	16	4	11
Depreciation and amortisation	5	5	9	9	8	6
Costs in addition to depreciation and amortisation
that does not result in disbursements	-	-	-	-	-	-

Other disclosures by line of business (continued)

		Parent Company	Total
	2007/08	2006/07	2007/08	2006/07
Assets	2	3	1,008	990
Undistributed assets	-	-	47	129
Total assets	2	3	1,055	1,119
Liabilities	23	219	405	606
Undistributed liabilities	-	-	191	81
Total liabilities	23	219	596	687
Capital expenditure	0	1	25	34
Depreciation and amortisation	1	1	23	21
Costs in addition to depreciation
and amortisation that does
not result in disbursements	-	-	-	-

External sales by geographic market

	2007/08	2006/07
Sweden	676	622
Denmark	495	440
Norway	347	330
Finland	189	153
United Kingdom	45	50
Germany	126	111
Poland	60	54
Other Europe	154	143
Other world	80	71
	2,172	1,974

Capital expenditure and assets by geographic market

		Capital expenditure	Assets
	2007/08	2006/07	31/3/2008	31/3/2007
Sweden	10	17	472	481
Denmark	10	14	282	294
Norway	3	1	65	70
Finland	1	2	110	124
United Kingdom	0	0	12	17
Germany	1	0	51	49
Poland	0	0	15	16
Other Europe	0	0	5	5
Other world	0	0	6	7
Undistributed assets	-	-	37	56
	25	34	1,055	1,119
Parent Company			2007/08	2006/07
Internal net revenues by line of business
Electronics			11	10
Mechatronics			6	6
Communications			9	8
			26	24
Internal net revenues by geographic market
Sweden			11	9
Denmark			7	7
Norway			2	3
Finland			3	2
Germany			1	1
Other countries			2	2
			26	24

Note 4 Distribution of net revenue

Net revenue by product category

	2007/08	2006/07
Group
Special products and systems	1,238	1,130
Standard components	188	191
Service and consulting	66	56
In-house production	680	597
	2,172	1,974

In the case of other types of revenue, dividend and interest income are reported in net financial items. See Note 11. Lagercrantz had no royalty income during 2007/08 and 2006/07.

Note 5 Operating expenses by type of cost

	2007/08	2006/07
Group
Personnel costs	409	381
Depreciation and amortisation	23	21

Note 6 Employees, personnel costs and fees to the Board of Directors and auditors

Average number of employees

		of whom		of whom
	2007/08	men	2006/07	men
Parent Company
Sweden	10	80%	10	80%
Other Group companies
Sweden	384	74%	367	75%
Denmark	198	45%	190	47%
Norway	40	73%	41	68%
Finland	80	44%	74	43%
United Kingdom	8	63%	11	64%
Germany	24	67%	22	64%
Poland	18	61%	19	58%
Other countries	7	43%	7	57%
Group company total	759	61%	731	63%
Group total	769	61%	741	63%

Salaries, other compensation and social benefits

	2007/08			2006/07
	Salaries and compensation	Social benefits	Salaries and com- pensation	Social benefits
Parent Company (of which pension costs)	14	7 (3)1)	14	6 (3)1)
Other Group companies (of which pension costs)	303	85 (19)	281	80 (18)
Group total (of which pension costs)	317	92 (22)2)	295	86 (21)2)

1) Of the Parent Company's pension costs MSEK 1 (1) refers to the group Board of Directors and President. The group also includes executive vice presidents and presidents of subsidiaries.

2) Of the Group's pension costs, MSEK 4 (6) refers to the group Board of Directors and President, as well as to Presidents in subsidiaries. The Group's pension obligations to this group amount to MSEK 1 (1).

Salaries, other compensation by country and among directors,

etc. and other employees

		2007/08		2006/07
Parent Company	Directors and President	Other employees	Directors and President	Other employees
Sweden	5	9	7	7
(of which bonus, etc.)	(1)	(2)	(1)	(1)
Group companies in Sweden	11	123	7	112
(of which bonus, etc.)	(1)	(3)	(0)	(2)
Total Sweden	16	132	14	119
(of which bonus, etc.)	(2)	(5)	(1)	(3)
Outside Sweden
Denmark	8	88	8	82
(of which bonus, etc.)	(1)	(3)	(0)	(2)
Norway	2	21	2	20
(of which bonus, etc.)	(-)	(0)	(0)	(1)
Finland	3	23	3	23
(of which bonus, etc.)	(0)	(1)	(0)	(1)
United Kingdom	1	3	1	4
(of which bonus, etc.)	(-)	(-)	(0)	(0)
Germany	1	11	1	11
(of which bonus, etc.)	(0)	(1)	(0)	(1)
Poland	1	4	1	3
(of which bonus, etc.)	(0)	(1)	(0)	(0)
Other countries	1	2	1	2
(of which bonus, etc.)	(-)	(-)	(-)	(-)
Outside Sweden total	17	152	17	145
(of which bonus, etc.)	(1)	(6)	(1)	(6)
Group total	33	284	31	264
(of which bonus, etc.)	(3)	(11)	(2)	(9)

The group Directors and President includes Board of Directors, Presidents and Executive Vice Presidents.

Gender distribution in management	31/3/2008 Proportion of women	31/3/2007 Proportion of women
Parent Company
Board of Directors	20%	20%
Other members of senior management	0%	0%
Group total
Board of Directors	0%	3%
Other members of senior management	0%	3%
Absence due to illness Data refer to the Swedish companies	2007/08	2006/07
Total absence due to illness as a
proportion of regular working hours	4%	4%
Proportion of total absence referring to continuous
absence due to illness for 60 days or more	56%	56%
Absence due to illness by gender:
Men	4%	3%
Women	5%	7%
Absence due to illness by age category:
29 years or younger	5%	2%
30−49 years	3%	3%
50 years or older	7%	8%

In the Parent Company total absence due to illness was 1 (1) percent. Absence due to illness by category is not reported for reasons of integrity.

Principles of compensation for the Board of Directors and members of senior management

Fees paid to the Chairman of the Board of Directors and to members of the Board of Directors were set by the Annual Meeting. No separate fees are paid for committee work. In accordance with Annual Meeting resolution, compensation to the President & CEO and other members of senior management consists of basic salary, variable compensation, other benefits, pension and financial instruments. The total compensation shall be adjusted to conditions on the market, be competitive and should be in line with responsibility and authority. The variable portion of the compensation shall be maximised at and never exceed the fixed salary. The variable portion of the compensation should also be based on outcome relative to set goals and on individual performance. The retirement age shall be 60−65 years and in addition to an ITP plan only defined contribution pension plans may be offered. In the case of termination, a severance payment in a maximum amount of one year's salary may be offered in addition to salary during the period of notice. In addition to the existing incentive programmes and the programme proposed to the Annual General Meeting, no other share-based or share-price-related programmes will be offered.

As far as compensation to the President and other members of senior management is concerned, the Board of Directors has appointed a compensation committee consisting of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, with the President as reported. The task of the committee is to evaluate and suggest principles of compensation for members of senior management to the Board of Directors. The Board of Directors submits proposals to the Annual Meeting for resolution.

The proposal to the 08 Annual General Meeting is set forth in the Administration Report.

Note 6, cont'd

Compensation and other benefits, Parent Company 2007/08

SEK thousand	Basic salary	Variable compensation	Other benefits	Pension cost	Total
Chairman of the Board of Directors
Anders Börjesson	350				350
Directors
Tom Hedelius, Vice Chairman	250				250
Pirkko Alitalo	175				175
Lennart Sjölund	175				175
President & CEO
Jörgen Wigh	1,962	511	91	550	3,114
Executive Vice President
Niklas Enmark	1,141	256	91	244	1,732
Other members of senior management
5 personer	5,462	1,051	500	1,646	8,659
Total	9,515	1,818	682	2,440	14,455

Compensation and other benefits, Parent Company 2006/07

	Basic	Variable	Other	Pension
SEK thousand	salary	compensation	benefits	cost	Total
Chairman if the Board of Directors
Anders Börjesson	350				350
Directors
Tom Hedelius, Vice Chairman	250				250
Pirkko Alitalo	175				175
Lennart Sjölund	175				175
President & CEO
Jörgen Wigh	1,790	418	82	500	2,790
Executive Vice President
Niklas Enmark	1,059	245	71	240	1,615
Other members of senior management
5 persons	6,345	1,116	469	1,160	9,090
Total	10,144	1,779	622	1,900	14,445

Other members of senior management consist of other Group executives and executives with division responsibility. For the composition of the management group, refer to page 58. Compensation to this group, which in 2007/08 consisted of five persons, was covered by the resolution of the 2007 Annual General Meeting dealing with principles of compensation of members of senior management. The Compensation Committee has verified compliance with the resolution of the Annual General Meeting and conformity of the compensation with market conditions has been confirmed by comparing with compensation in other similar listed companies.

Pensions

The retirement age for the President & CEO is 60 years. The retirement age of other members of senior management is 65 years. Pension is paid equivalent to the ITP plan, which is a defined contribution plan.

Severance payment

The period of notice for the President is 12 months when termination is at the initiative of the Company and 6 months when termination is at the initiative of the President. In the case of termination at the initiative of the Company, the President is entitled to a severance payment of the equivalent of one year's salary in addition to salary during the period of notice. No severance payment is payable in the case of termination at the initiative of the President. The severance payment is not prorated against other income. The period of notice for the other members of senior management is 6–12 months when termination is at the initiative of the Company and up to 6 months when termination is at the initiative of the employee. In the case of termination at the initiative of the Company, members of senior management are entitled to a severance payment of the equivalent of up to one year's salary, in addition to salary during the period of notice. No severance payment is payable in the case of termination at the initiative of the employee. The severance payment is not prorated against other income.

Option programme

A three-year call option programme for members of senior management was resolved by the 2006 Annual General Meeting. The call option programme will consist of call options for shares repurchased by Lagercrantz Group where each option gives its holder the right to acquire one repurchased class B share after 3.25 years, with a potential for redemption after three years. The share will be acquired at a redemption price to be determined as a percentage mark-up to the average market price of the share determined on the basis of the volume-weighted average during ten trading days after the Annual General Meeting in accordance with quoted paid prices. The programme will cover members of senior management with a direct possibility of affecting the Group's income. The proportion between the number of call options the employee is offered to acquire will vary with the responsibility and position of the employee. The redemption price and the premium will reflect the share's market price performance during the year and a new market valuation shall be performed on each occasion of issuance of new shares. The members of the Board of Directors do not have the right to acquire call options, with the exception of the Company's President & CEO.

One prerequisite for being awarded call options is that the employee has concluded a special pre-emption agreement with the Company. Pre-emption shall occur at the market value at the time of termination of employment, a tender offer for all outstanding shares of the Company by a third party and in cases when the call options are to be transferred to a third party. In all other respects the call options are freely transferable. The premium for the call options shall be equivalent to the market value of the call options in accordance with external valuation applying the generally accepted valuation method (the Black & Scholes model).

The measurement period for calculation of the option premium applying the Black & Scholes model shall be during ten trading days after the Annual General Meeting in question. For the purpose of encouraging participation in the Programme, a subsidy will be payable up to the equivalent to the premium paid. The employee will be responsible for paying income tax on the amount of the subsidy, which thereby will only be equivalent to a part of the premium paid. Payment of the subsidy is proposed to be paid two years after the issue resolution provided the option holder is still in the employment of the Group at this point in time and still owns the options. Call options equivalent to a maximum of approximately 3.0 percent of the total number of shares outstanding, including class A and class B shares, and also including shares held in treasury, may be issued. The intention is that approximately one third of the call options will be issued at the time of the 2006 Annual General Meeting, approximately one third at the time of the 2007 Annual General Meeting and approximately one third at the time of the 2008 Annual General Meeting, equivalent to approximately one (1) percent per year of the number of shares outstanding calculated at the time of issuance. Since call options are awarded every year, loyal employees are rewarded and market price increases and decreases can be managed more effectively with better risk diversification. The award resolved by the 2006 Annual Meeting for 2006 comprised 27 persons and a total of 255,000 call options. Awards varied between 5,000 and 37,600 options. The President & CEO acquired 37,600 and other members of senior management acquired 112,900. The measuring period to determine the average share price, which was SEK 28.81, was 31 August–13 September 2006. The redemption price for the shares resolved was 125 percent of the average price, was set as SEK 36.00. The market value of the call options was set to be SEK 2.90 per option by an independent valuation institute. The cost for the programme amounted to MSEK 1.0, with only a marginal effect on earnings per share. About MSEK 0.2 of the cost was charged to earnings for 2006/07. The effect on equity was zero.

The award resolved by the 2007 Annual Meeting comprised 27 persons and a total of 260,000 call options. Awards varied between 5,000 and 43,300 options. The President & CEO acquired 43,300 and other members of Group management acquired 111,500. The measuring period to determine the average share price, which was SEK 35.48, was 3 September–14 September 2007. The redemption price for the shares resolved was 125 percent of the average price, was set as SEK 44.40. The market value of the call options was set to be SEK 3.50 per option by an independent valuation institute. The cost for the programme amounted to MSEK 1.0, with only a marginal effect on earnings per share. MSEK 0.5 of the cost is charged to the 2007/08 result. The effect on equity was MSEK 0.8.

		Group		Parent Company
	2007/08	2006/07	2007/08	2006/07
KPMG
Audit assignments	3	3	0.6	0.6
Other assignments	1	2	0.3	1.4
Other auditors
Audit assignments	0	1	-	-
Other assignments	0	1	-	0.1

By audit assignment is meant examination of the annual accounts and the administration by the Board of Directors and the President, other tasks the Company's auditors are obligated to perform, and advice or other assistance prompted by such examination or the performance of such tasks. Everything else is other assignments.

Note 7 Other operating revenue 2007/08 2006/07

13	15
0	2
5	-
4	1
2	6
24	24

Note 8 Other operating expenses
	2007/08	2006/07
Group
Exchange rate losses on receivables/
liabilities of an operating character	–5	–2
Other costs	–1	–2
	–6	–4

Note 9 Depreciation and amortisation of tangible and intangible non-current assets

	2007/08	2006/07
Group
Depreciation and amortisation
according to plan by class of asset
Intangible assets	–8	–7
Buildings and land	0	–1
Leasehold improvements	–1	0
Plant and machinery	–5	–4
Equipment, tools, fixtures and fittings	–9	–9
	–23	–21
Amortisation according to plan by function
Cost of goods sold	–8	–6
Research and development	–2	–2
Selling costs	–9	–8
Administrative expenses	–4	–5
	–23	–21
Parent Company
Depreciation according to plan by class of asset
Equipment, tools, fixtures and fittings	0	0
	0	0
Amortisation according to plan by function
Administrative expenses	0	0
	0	0

Note 10 Leasing fees relating to operating leases and rental expenses

	2007/08	2006/07
Group
Leasing fees paid during the financial year	37	34
Amounts of future annual payments
1 year after current financial year	29	28
2 years after current financial year	19	17
3 years after current financial year	12	10
4 years after current financial year	8	5
5 years after current financial year	7	4
	75	64
Parent Company
Leasing fees paid during the financial year	2	2
Amounts of future annual payments:
1 year after current financial year	2	2
2 years after current financial year	2	2
More than 3 years after current financial year	1	2

5 6

Note 11 Finance income

	2007/08	2006/07
Group
Interest income	5	3
Exchange rate gains	2	1
	7	4
Parent Company
Result from shares in Group companies
Interest income from Group companies	4	4
Dividend income	81	32
	85	36
Other interest income and similar items
Exchange rate gains	1	-
Other interest income	0	0
	1	0
Total finance income	86	36

Note 12 Finance expense

	2007/08	2006/07
Group
Interest expense, pensions	–2	–2
Other interest expense	–12	–9
Effect of interest hedging	0	-
Exchange rate losses	–3	–2
Other	0	0
	–17	–13
Parent Company
Result from shares in Group companies
Interest expense to Group companies	–3	–2
Exchange rate losses	0	–1
Impairment losses	–30	-
	–33	–3
Other interest expense and similar items
Other interest expense	–10	–6
Effect of interest hedging	0	-
Other	–1	0
	–11	–6
Total finance expense	–44	–9

Note 13 Exchange rate differences affecting the result

	2007/08	2006/07
Group
Exchange rate differences affecting operating earnings	–1	2
Financial translation differences	–1	–1
	–2	1
Parent Company
Financial translation differences	1	0
	1	0

Note 14 Taxes on the year's result

	2007/08	2006/07
Group
Current tax expense (–)/ tax income (+)
Tax expense for the period	–26	–22
Adjustment of taxes attributable to prior years	2	0
	–24	–22
Deferred tax expense (–)/tax income (+)
Deferred taxes on temporary differences	2	1
Deferred taxes on change of capitalised
tax value of tax loss carryforwards	–8	–4
	–6	–3
Total reported tax expense/
tax income in the Group	–30	–25

The value of tax loss carryforwards is taken into account when it is believed that they will result in lower tax payments in the future.

45

Rent for premises accounts for the largest part of leasing costs.

Reconciliation of effective tax	2007/08	2006/07
Group
Result before taxes	121	90
Tax according to Parent Company's tax rate, 28%	–34	–25
Effect of other tax rates for foreign subsidiaries	1	1
Non-deductible expenses	–1	–1
Other non-taxable revenue	2	0
Taxes attributable to prior years	2	0
Total effective taxes	–30	–25
Parent Company	2007/08	2006/07
Current tax expense (–)/tax revenue (+)
Tax for the period	0	2
	0	2
Deferred tax expense (–)/tax revenue (+)
Deferred taxes on temporary differences	0	0
Deferred taxes relating to change in capitalised tax
value of tax loss carryforwards	4	4
	4	4
Total reported tax expense/tax
income in the Parent Company	4	6
Reconciliation of effective tax	2007/08	2006/07
Parent Company
Result before taxes	32	13
Tax according to current tax rate, 28%	–9	–4
Effect of write-downs	–8	-
Dividends from subsidiaries	22	10
Non-deductible expenses	–1	0
Total effective taxes	4	6
Tax items carried directly to equity	2007/08	2006/07
Parent Company
Current tax component of Group
contributions received	–5	–2
	–5	–2

Note 15 Goodwill

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	128	38
Additions	11	90
Translation difference	1	0
Reported value at end of period	140	128
Goodwill allocated to Group companies as follows:
Direktronik AB	9	-
STV Sv Tele & Video Konsult AB	5	5
ISG Systems AB	12	12
Elpress AB	40	40
Nordic Alarm AB	20	20
K&K Active OY	27	26
K&K Sales OY	4	4
ISIC A/S	5	5
Secos Gmbh	2	0
Unitronic AG	16	16
Total Goodwill	140	128

Test for impairment of goodwill

The value of goodwill is not amortised. Each year an investigation is made to determine if any impairment of goodwill has occurred. The calculation is based on expected future cash flows for each cash-generating unit, based on each respective unit's business plan.

For present value calculation of expected future cash flows the current weighted average cost of capital (WACC) and expected growth is used based on the unit's in question return on equity requirement and a market rate for borrowing. In addition hereto, the unique risk associated with the individual unit is taken into account in the form of a special adjustment factor. The weighted average cost of capital used in the Group amounted to 12.0−13.5 percent before taxes.

Discounted cash flows are then compared with the book value per cash-generating unit. The test for impairment is normally performed during the fourth quarter each year and the test performed during the past three years have shown that there is no need for an impairment charge.

Note 16 Trademarks

	31/3/2008	31/3/2007
Group
Accumulated acquisition cost
Opening balance	34	12
Additions	2	22
Translation difference	0	0
Closing balance	36	34
Trademarks are allocated to Group companies as follows:
Direktronik AB	2	-
STV Sv Tele & Video Konsult AB	3	3
Elpress AB	15	15
Nordic Alarm AB	7	7
ISIC A/S	9	9
Total trademarks	36	34

Each year an investigation is made to determine if any impairment of trademarks has occurred in accordance with the same principles as for goodwill.

Note 17 Other intangible assets

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	77	39
Additions	7	54
Additions via new companies	-	6
Sales and disposals	0	–22
Translation difference	0	0
	84	77
Accumulated amortisation according to plan
Opening balance	–14	–26
Additions via new companies	-	–3
Year's amortisation according to plan	–8	–7
Sales and disposals	0	22
Translation difference	0	0
	–22	–14
Closing balance	62	63

Other intangible assets primarily consist of patents, customer relationships, capitalised development costs and software. Of the total reported value, MSEK 24 (18) refers to intangible assets. A total of MSEK 6 (8) was expensed as research and development during the year.

Note 18 Buildings, land and land improvements

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	49	95
Additions	0	1
Sales and disposals	–46	–47
Translation difference	0	0
1)	3	49
Accumulated depreciation according to plan
Opening balance	–11	–26
Sales and disposals	10	16
Year's depreciation according to plan	0	–1
Translation difference	0	0
	–1	–11
Closing balance	2	38
Tax assessment values, buildings (Sweden)	1	7
Tax assessment values, land (Sweden)	0	2

1) Acquisition values do not include capitalised interest.

Note 19 Leasehold improvements

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	2	2
Additions	2	0
Translation difference	0	0
	4	2
Accumulated depreciation according to plan
Opening balance	–1	–1
Year's depreciation according to plan	–1	0
	–2	–1
Closing balance	2	1

Note 20 Plant and machinery

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	60	17
Additions	10	10
Additions via new companies	-	34
Sales and disposals	–1	–1
Translation difference	0	0
	69	60
Accumulated depreciation according to plan
Opening balance	–34	–10
Sales and disposals	1	1
Additions via new companies	-	–23
Reclassification	0	2
Year's depreciation according to plan	–5	–4
Translation difference	0	0
	–38	–34
Closing balance	31	26

Note 21 Equipment, tools, fixtures and fittings

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	104	95
Additions	6	8
Additions via new companies	5	11
Sales and disposals	–5	–11
Reclassification	1	2
Translation difference	0	–1
	111	104
Accumulated depreciation according to plan
Opening balance	–86	–77
Additions via new companies	–3	–8
Sales and disposals	3	9
Reclassification	0	–2
Year's depreciation according to plan	–9	–9
Translation difference	0	1
	–95	–86
Closing balance	16	18
Parent Company
Accumulated acquisition values
Opening balance	1	1
Additions	0	0
	1	1
Accumulated depreciation according to plan
Opening balance	–1	0
Year's depreciation according to plan	0	–1
	–1	–1
Closing balance	0	0

Note 22 Shares in Group companies

	31/3/2008	31/3/2007
Parent Company
Accumulated acquisition values
Opening balance	631	440
External acquisitions	24	183
Sale to Group company	0	-
Extraction of capital	–17
Mergers	0	0
Shareholder contribution	-	8
	638	631
Accumulated impairment loss
Opening balance	–30	–30
Year's write-downs	–30	-
	–60	–30
Closing balance	578	601

External acquisitions and sales are reported in Note 38.

Group company Enkom OY was merged with Finn-Crimp OY during the year, thereby forming EFC Finland OY.

Specification of the Parent Company's and the Group's holdings of shares in Group companies

Group companies2), company number, registered office	Number of shares	Stake in %1)	31/3/2008	Book value 31/3/2007
Acte Embedded Technology AB,
556600-8032, Norrköping	500	100.0	13	13
Acte Systems AS,
927 714 574, Bergen, Norway	600	100.0	1	1
Acte Components Ltd,
4209447, Hampshire, UK	49,999	100.0	7	10
Acte AS,
923 148 442, Oslo, Norway	5,000	100.0	33	44
Acte Supply AB,
556213-2406, Norrköping	50,000	100.0	25	41
Acte Oy,
239 992, Helsinki, Finland	300	100.0	3	9
Acte Wireless AB, 556530-0406, Solna	1,000	100.0	8	8
B2B Tech AB,
556201-1154, Stockholm	5,000	100.0	7	7
Direktronik AB,
556281-9663, Nynäshamn	3,000	100.0	24	-
Elpress AB,
556031-5607, Kramfors	80,000	100.0	99	99
Elpress A/S,
CVR 26162629, Silkeborg, Denmark	100	100.0	-	-
Elpress GmbH,
HBR 3252, Viersen, Germany	100	100.0	-	-
Elpress (Beijing) Electrical
Components Co. Ltd, Beijing, China	100	100.0	-	-
Kablema AB,
556746-2196, Kramfors	100	100.0	-	-
EFC Finland Oy,
1750567-0, Korsholm, Finland	1,250	100.0	13	8
HeathComm AB,
556552-1217, Solna	500	100.0	2	2
HeathComm AS,
933 199 665, Bergen, Norway	7,000	100.0	13	13
ISG Systems AB, 556468-2192, Höganäs	200	100.0	21	21
K&K Active OY,
0980670-5, Helsingfors, Finland	100	100.0	42	42
K&K Sales OY,
0852696-3, Helsingfors, Finland	100	100.0	7	7
Kablageproduktion i Västerås AB,
556509-1096, Västerås	5,000	100.0	30	41
Lagercrantz Communication AB,
556260-2127, Solna	1,000	100.0	3	3
Nordic Alarm AB,
556318-0032, Solna	38,300	100.0	42	42
STV Sv Tele & Video Konsult AB,
556307-4565, Stockholm	65,000	100.0	16	16
Unitronic AG,
HRB 40042 , Düsseldorf, Germany	153,600	100.0	38	38
Secos GmbH , Baar, Switzerland	20,000	100.0	-	-
Lagercrantz A/S,
81 74 67 10 , Copenhagen, Denmark	6	100.0	131	131
Acte A/S,
71 28 89 19, Copenhagen, Denmark	2	100.0	-	-

Note 22, cont'd

Specification of the Parent Company's and the Group's
holdings of shares in Group companies

Group companies2), company number, registered office	Number of shares	Stake in %1)	31/3/2008	Book value 31/3/2007
Lagercrantz Asia Ltd, Hong Kong	20,000	100.0	-	-
Acte Poland Sp Z o.o.,
5 753, Warsaw, Poland	2	100.0	-	-
IWSFE Sp Z o o.,
296 322, Warsaw, Poland	4,500	100.0	-	-
Elfac A/S,
17 46 50 31, Silkeborg, Denmark	1	100.0	-	-
2B Electronics A/S,
81 50 38 18, Copenhagen, Denmark	5,000	100.0	-	-
HeathComm A/S,
25 12 54 44, Copenhagen, Denmark	500	100.0	-	-
ISIC A/S,
16 70 45 39, Århus , Denmark	33,400	100.0	-	-
BBE A/S,
17 83 92 33 Copenhagen, Denmark	25,000	100.0	-	-
Betech Data A/S,
10 51 07 32, Copenhagen, Denmark	1	100.0	-	-
Companies merged during the year			-	5
			578	601

1) Refers to ownership stake of capital, which also coincides with the proportion of votes for the total number of shares outstanding.

2) Group companies are reported at book value; other companies are owned indirectly via Group companies.

Note 23 Receivables from Group companies

	31/3/2008	31/3/2007
Parent Company
Accumulated acquisition values
Opening balance	85	60
Incremental receivables	9	68
Receivables paid	–35	–42
Translation difference	–1	–1
Closing balance	58	85

Note 24 Other long-term receivables

	31/3/2008	31/3/2007
Group
Accumulated acquisition values
Opening balance	4	3
Incremental receivables	0	1
Receivables paid	0	0
Closing balance	4	4

Note 25 Inventories

Major one-time impairment charges were made during the year in the amount of MSEK 9 (11).

Note 26 Trade receivables

Aging of unimpaired trade receivables due	31/3/2008	31/3/2007
Group
Trade receivables not due	254	302
Trade receivables due in 0–30 days	54	37
Trade receivables due in >30 days–90 days	21	10
Trade receivables due in >90 days–180 days	5	5
Trade receivables due in > 180 days	5	5
Total	339	359
Provision account for bad debt losses	31/3/2008	31/3/2007
Group
Opening balance	5	6
Reversal of previously sustained impairment losses	–1	–2
Year's impairment losses	0	1
Translation difference	0	0

Bad debt losses realised during the year have been carried to the income statement in the amount of SEK 1(2).

Note 27 Earned but not yet invoiced revenue

	31/3/2008	31/3/2007
Parent Company
Contract assignments
Accumulated assignment income recognised as revenue	115	118
Invoiced revenue	102	84
Total due from clients	13	34
Accumulated assignment expenditure and recognised
profit (after deduction of reported loss) at end of period	115	118
Advance payments received	0	-
Amount held back by clients	-	-

Note 28 Prepaid expenses and accrued income

	31/3/2008	31/3/2007
Parent Company
Prepaid rent	0	0
Other items	1	1
	1	1

Note 29 Shareholders' equity

Parent Company

According to Swedish law, shareholder's equity shall be divided between funds that may not be paid as dividends (restricted funds) and funds that may be paid as dividends (unrestricted funds).

Restricted reserves

Restricted funds consist of share capital and the following reserve:

Legal reserve

The purpose of the legal reserve is to set aside the portion of net earnings not required to cover a loss brought forward.

Unrestricted equity

Retained earnings

Consist of the preceding year's unrestricted equity after any allocation to legal reserve and after any dividends paid. Constitute the total unrestricted equity together with this year's income, i.e. the amount available for payment as dividends to the shareholders.

Share capital

Distribution and change in class of share

Class of share	Shares outstanding	Number of votes
Class A shares, 10 votes per share		1,095,998 10,959,980
Class B share, 1 vote per share	23,318,234 23,318,234
Class B shares held in treasury		–1,936,423 –1,936,423
Totalt	22,477,809 32,341,791
	Class A shares Class B shares
Number of shares outstanding at the beginning and end of the period		1,095,998 23,318,234

Repurchased shares	Class A shares Class B shares
Number of shares repurchased at the beginning of the period	-	736,423
Shares repurchased during the year		1,200,000
Number of shares held in treasury at end of period	-	1,936,423

The share capital amounted to MSEK 48.8 at year-end.

The class B share is listed on OMX Nordic Exchange Stockholm.

According to the Articles of Association, the lowest amount for the share capital is MSEK 25 and the maximum amount is MSEK 100.

The quotient value of the share is SEK 2.00.

The proposed dividend for the year is SEK 1.50 (1.25) per share.

The option programme described in Note 6 is secured via repurchased shares at an average price of SEK 28.25.

When the call options are exercised at a redemption price of SEK 36.00 and SEK 44.40 per share, the number of shares outstanding can potentially increase by the number of redeemed call options, which is 515,000. In such a case the number of shares held in treasury decreases accordingly.

Group

The Group's equity consists of share capital and the following items:

Other contributed capital

Refers to capital contributed by the owners.

Reserves

Reserves refer to translation and hedging reserves.

The translation reserve includes all exchange rate translation differences that arise when translating the financial statements of foreign operations. These entities prepare their financial statements in other currencies than the Group and the Parent Company, which report in Swedish kronor (SEK). The restatement reserve additionally consists of exchange rate differences that arise upon revaluation of increased investments in Group companies.

The hedging reserve includes the effective portion of the accumulated net change in fair value of a cash flow hedging instrument attributable to hedging transactions that have not yet transpired.

Retained earnings

Retained earnings include income earned profit in the Parent Company and its subsidiaries. Profit for the year is reported separately in the balance sheet. Prior provisions to the legal reserve, not including transferred premium reserves, are included in this equity item.

Capital management

The Group's goal, as expressed in its finance policy, is to have a good capital structure and financial stability in the interest of retaining the confidence of investors, credit institutions and the market in general. In addition, this constitutes a foundation for continued development of the business operations. Capital is defined as total shareholders' equity, not including minority interests.

The ambition of the Board of Directors is to retain a balance between a high return and the security of a solid capital base. The Group's goal is to achieve a return on equity of at least 25 percent per year. For the 2007/08 financial year the return was 21 percent (16). The improvement was achieved by a profit increase to MSEK 91 (65) and average equity during the year amounting to MSEK 445 (412), i.e. that profit increased more than equity. This is due, in part, to dividends paid during the year in the amount of approximately MSEK 30 and repurchase of shares for approximately MSEK 37.

The Group's dividend policy is to pay a dividend amounting to 30–50 percent of the year's profit. Before the 2008 Annual General Meeting the Board of Directors has proposed a dividend of SEK 1.50 (1.25) per share. The proposed dividend translates to a dividend share of 38 percent. The dividend is also equivalent to 7 percent (7) of consolidated equity as of 31 March 2008.

The Group's Board of Directors has a mandate from the 2007 Annual General Meeting to repurchase shares. The Group has made repurchases of shares on several occasions. In part, the timing of these repurchases has been determined by the market price of the share. A portion of the repurchased shares are intended cover the Group's commitment under outstanding option programmes, where members of senior management and certain key persons have the opportunity to acquire class B shares by exercising acquired options. There is no formal repurchase plan. Decisions to buy and sell shares in the Group are instead made by the Board of Directors within the framework of the mandate given by the Annual General Meeting. The Board of Directors is again proposing to the 2008 Annual General Meeting to pass a resolution to repurchase own shares. There was no change in the Group's capital management during the year.

Note 30 Provision for pensions and similar obligations

Defined benefit obligations and value of managed assets

Lagercrantz Group has defined benefit pension plans in just a few countries. These plans cover virtually all employees in Norway and also certain subsidiaries in Sweden. The plans provide benefits based on the compensation and the years of service the employees have at or close to retirement. The pension plan according to ITP secured by insurance with Alecta is reported as a defined contribution plan since the Company has not had access to information detail making it possible to report this plan as a defined benefit plan.

	31/3/2008	31/3/2007
Group
Present value of wholly or partially funded obligations	28	20
Fair value of managed assets	–17	–16
Surplus (−) / Deficit (+) in the pension plan	11	4
Present value of unfunded defined benefit obligations	60	59
Net obligations before adjustments	71	63
Adjustments:
Adjustments based on experience of pension obligations	–2	–4
Other actuarial gains and losses on pension obligations	–10	–2
Subtotal of accumulated unreported actuarial
gains (+) and losses (–)	–12	–6
Net amount in the balance sheet
(obligations +, asset –)	59	57
Net amount reported in the following items in
the balance sheet:
Provision for pensions and similar obligations	59	57
Net amount in balance sheet	59	57

Distribution of amount on plans in the

following countries:	31/3/2008	31/3/2007
Sweden	46	45
Norway	10	10
Germany	3	2
Amount in balance sheet	59	57

Actuarial gains and losses may arise when the present value of the obligation and the fair value of managed assets are determined. They arise either when the actual outcome differs from the previously made assumption, or when assumptions are changed. The portion of the accumulated actuarial gains and losses at the end of the preceding year that exceeds 10 percent of the higher of present value of the obligations and the fair value of managed assets is expensed and distributed evenly over the average remaining time of employment of the employees.

Pension cost	2007/08	2006/07
Group
Defined benefit plans
Cost of pensions earned during the year	–2	–3
Interest expense	–3	–3
Anticipated return on managed assets	1	1
Actuarial gains (−) and losses (+) reported during the year	0	0
Cost of defined benefit plans	–4	–5
Cost of defined contribution plans	–18	–16
Total cost of compensation after
termination of employment	–22	–21

The pension cost relating to the most important defined benefit pension plans in the amount of MSEK 5 (6) is reported in the income statement on the lines Selling costs, Administrative expenses and Interest expense. The interest component of the pension cost reported as financial expense amounted to MSEK −3 (–3). The pension cost of defined contribution pension plans was MSEK 18 (16). The total cost of defined benefit and defined contribution pension plans amounted to MSEK 22 (21).

Reconciliation of net amount for pensions in the balance sheet

The following table explains how the net amount on the balance sheet has changed during the period:

	31/3/2008	31/3/2007
Opening balance of fair value of managed assets	–16	–19
Anticipated return on managed assets	–1	–1
Funds contributed by the Company	–1	–1
Benefits paid	1	0
Actuarial gains (−) and losses (+) on managed assets	0	2
Other	0	3
Closing balance of fair value of managed assets	–17	–16
Opening balance of present value of obligations	73	73
Cost of defined benefit plans	5	5
Payment of compensation	–2	–1
Payment of contributions by the Company	0	–1
Change in actuarial gains /losses	0	–3
Translation differences	0	0
Closing balance of present value of obligations	76	73
Net amount of closing balance in balance sheet	59	57

The managed assets consist of risk-diversified investments via established life insurance companies.

Actuarial assumptions

The following significant actuarial assumptions have been applied when calculating the obligations: (weighted average values)

	31/3/2008	31/3/2007
Discount rate	4.3%	4.2%
Anticipated return on managed assets	5.5%	5.5%
Anticipated inflation	2.2%	2.0%
Future salary increases	3.5%	3.7%
Personnel turnover	5.0%	5.0%
Change in income amount	3.4%	3.5%
	31/3/2008	31/3/2007
Group
Pledged assets for pension obligations	None	None
Contingent liabilities for pension obligations	1	1

Note 30, cont'd

Historical information
	2007/08	2006/07	2005/06
Group
Present value of wholly or partially
funded obligations	28	20	23
Fair value of managed assets	–17	–16	–19
Surplus (–)/Deficit (+) in pension plan	11	4	4
Adjustment based on experience of
defined benefit plans	–2	–4	–1

The Group estimates that MSEK 6 will be paid during 2008/09 to funded and unfunded defined benefit plans.

Parent Company

Provision for pensions - - -

Pledged assets for pension obligations

The Parent Company has issued its guarantee for subsidiary PRI liabilities.

Note 31 Deferred taxes

31/3/2008	Deferred tax claim	Deferred tax liability	Net
Group
Buildings and land	-	-	-
Other non-current assets	9	–26	–17
Other provisions	1	-	1
Untaxed reserves	-	–3	–3
Other	3	0	3
Loss carryforwards	13	-	13
	26	–29	–3
31/3/2007	Deferred tax claim	Deferred tax liability	Net
Group
Buildings and land	-	–5	–5
Other non-current assets	11	–26	–15
Other provisions	1	-	1
Untaxed reserves	-	–1	–1
Other	3	0	3
Loss carryforwards	20	-	20

Unreported deferred tax claims

Deferred tax claims relating to tax loss carryforwards of MSEK 2 (3) have not been recognised. The value of tax loss carryforwards is taken into account to the extent it is deemed possible that they will result in lower tax payments in the future.

Change of deferred taxes in temporary differences and tax loss carryforwards

Group	at beginning of year	Amount Reported via the income statement	Amount at year-end
Buildings and land	–5	5	-
Other non-current assets	–15	–2	–17
Other provisions	1	0	1
Untaxed reserves	–1	–2	–3
Other	3	-	3
Loss carryforwards	20	–7	13
	3	–6	–3

The Company reports no deferred taxes on temporary differences attributable to investments in Group companies. Any effects in the future will be recognised when the Company can no longer control the reversal of such differences, or when it for other reasons is no longer probable that reversal will take place within the foreseeable future.

The Parent Company has a deferred tax claim of MSEK 6 (6). The item refers mainly to a tax loss carryforward.

Note 32 Other provisions

	31/3/2008	31/3/2007
Group
Other provisions as long-term liabilities
Guarantee provisions	2	2
Other	1	2
	3	4
Other provisions as current liabilities
Costs for restructuring measures	2	2
Other	1	1
	3	3
Opening balance	7	9
Provisions set aside during the period	4	5
Amounts utilised during the period	–5	–7
Closing balance	6	7

Restructuring

Restructuring costs for which provisions are set aside primarily refer to measures attributable to personnel changes.

The Parent Company has a restructuring reserve of MSEK 3 (3), with a short-term portion of MSEK 3 (3).

Note 33 Financial assets and liabilities

Financial instruments by category

The fair value of financial assets and liabilities essentially agrees with reported values.

Group

31/3/2008	Loan and trade receivables	Derivative instruments for hedge accounting	Amount
Assets in the balance sheet
Long-term receivables	4		4
Trade receivables	339		339
Other short-term receivables	-	0	0
Cash and cash equivalents	79		79
Total	422	0	422

The consolidated balance sheet shows short-term receivables in the amount of 10 and financial derivative instruments as 0. The other items are non-financial.

31/3/2008	Other financial liabilities	Derivative instruments for hedge accounting	Amount
Liabilities in the balance sheet
Long-term liabilities to financial institutions	83		83
Current liabilities to financial institutions	30		30
Trade payables	219		219
Total	332	-	332
	Loan and trade	Derivative instruments for
31/3/2007	receivables	hedge accounting	Amount
Assets in the balance sheet
Long-term receivables	4		4
Trade receivables	359		359
Cash and cash equivalents	94		94
Total	457	-	457
31/3/2007	Other financial liabilities	Derivative instruments for hedge accounting	Amount
Liabilities in the balance sheet
Long-term liabilities to financial institutions	96		96
Current liabilities to financial institutions	102		102
Trade payables	224		224

Total 422 - 422

Note 33 cont'd

Parent Company
31/3/2008	Loan and trade	Derivative instruments for receivables hedge accounting	Amount
Assets in the balance sheet
Due from subsidiaries, long-term	58		58
Other short-term receivables	31	0	31
Cash and cash equivalents	0		0
Total	89	0	89
31/3/2008	Other financial liabilities	Derivative instruments for hedge accounting	Amount
Liabilities in the balance sheet
Long-term liabilities to financial institutions	78		78
Long-term liabilities to Group companies	67		67
Current liabilities to financial institutions	29		29
Trade payables	1		1
Other current liabilities	100		100
Total	275	-	275
31/3/2007	Loan and trade receivables	Derivative instruments for hedge accounting	Amount
Assets in the balance sheet
Due from subsidiaries, long-term	85		85
Other short-term receivables	16		16
Cash and cash equivalents	1		1

31/3/2007	Other financial liabilities	Derivative instruments for hedge accounting	Amount
Liabilities in the balance sheet
Long-term liabilities to financial institutions	88		88
Long-term liabilities to Group companies	12		12
Current liabilities to financial institutions	99		99
Trade payables	1		1
Other current liabilities	86		86
Total	286	-	286

Total 102 - 102

Note 34 Interest-bearing liabilities and provisions

The Group's interest-bearing liabilities are allocated in the balance sheet as follows: Provisions for pensions MSEK 59 (57), Long-term liabilities MSEK 83 (96), Current liabilities to credit institutions MSEK 30 (102) and Other current liabilities MSEK 0 (0). Total MSEK 172 (255). Provisions for pensions are defined as an interest-bearing provision since the defined benefit pension obligations in accordance with IAS 19 are computed to present value using a discount interest rate. For details, refer to Note 30.

Credit terms on trade payables in the Group follow normal industry practice. The interest rate swap acquired by the Parent Company in the amount of MSEK 100 matures on 30 March 2012.

Other maturity dates are reported below. The nominal value of interest-bearing liabilities and provisions essentially agree with book values.

Liabilities to credit institutions

Group	31/3/2008	31/3/2007
Current portion	13	13
Maturity, 2–5 years from the balance sheet date	44	47
Maturity, later than five years from
the balance sheet date	39	49
	96	109
Parent Company	31/3/2008	31/3/2007
Current portion	10	10
Maturity, 2–5 years from the balance sheet date	40	40
Maturity, later than five years from
the balance sheet date	38	48

Refers to acquisition loans without specific assets pledged. The loan is repaid over ten years and carries interest at a variable rate.

Committed credit facility

Group	31/3/2008	31/3/2007
Approved limit	306	317
Unutilised portion	–289	–228
Credit facility utilisation	17	89
Parent Company
Approved limit	250	250
Unutilised portion	–231	–161
Credit facility utilisation	19	89

The credit limit of the committed credit facility is renewed on an annual basis.

Assets pledged for committed credit facility

Group	31/3/2008	31/3/2007
Corporate mortgages	57	58
	57	58

Note 35 Accrued expenses and prepaid income

	31/3/2008	31/3/2007
Parent Company
Personnel costs	4	4
Other items	3	3
	7	7

Note 36 Interest paid

	2007/08	2006/07
Group
Interest income	5	4
Interest expense	–11	–8
Parent Company
Interest income	4	3
Interest expense	–13	–8

Note 37 Adjustment for items not included in cash flow

	2007/08	2006/07
Group
Depreciation and amortisation	23	21
Other provisions	4	–2
Impairment losses and disposals	0	1
Capital loss on non-current assets sold	–13	–15
Change in interest accrual	–1	2
Other items	2	2
	15	9
Parent Company
Depreciation and amortisation	0	0
Impairment losses	30	-
Restructuring reserve	0	0
Change in interest accrual	–1	1
	29	1

The change in operating receivables 2007/08 was affected by a advance payment for the shares in CAD Kompagniet A/S in the amount of MSEK 25. More about this acquisition in Note 43.

Note 38 Investments in businesses

During the financial year, 100 percent of Direktronik AB and the remaining 40 percent of Secos GmbH were acquired. The total value of acquired assets, liabilities purchase money and the effect on the Group's cash and cash equivalents were as follows:

	2007/08	2006/07
Group
Intangible non-current assets	–13	–155
Tangible non-current assets	–2	–15
Inventories	–4	–49
Other current assets	–12	–63
Deferred tax liability	0	12
Long-term liabilities	-	19
Current liabilities	5	68
Minority interest	0	-
Total purchase money	–26	–183
Liquid funds in acquired entities	7	6
Equivalents from the year's acquisitions	–19	–177
Repayment of/increase in liabilities
relating to acquired businesses	–8	17
Cash flow attributable to investments
in businesses	–27	–160

Distribution of intangible assets in connection with acquisitions

	2007/08	2006/07
Intangible assets in the company before the acquisition	-	2
Consolidated goodwill	9	90
Trademark	2	22
Other intangible assets	-	41
Acquired intangible assets	11	155
Additional investment in existing company	2	-
Total intangible assets via acquisitions	13	155

Acquired units' contribution to the Group's revenue and profit acquisitions

	2007/08	2006/07
Revenue	55	305
Profit contributed before acquisition costs	7	26
Amortisation of surplus values	-	–2
Contribution to profit after acquisition costs	7	24
Financing costs	–1	–5
Contribution to profit after financing costs	6	19

Direktronik was part of the Group for the entire year.

Specification of major acquisitions

On 2 April 2007 Lagercrantz Group acquired all shares outstanding in Direktronik AB for MSEK 24. The company is a value-adding importer and reseller of hardware for data and network communication. Direktronik has 19 employees and had revenue of MSEK 55 during 2007/08, with a profit after net finance items of MSEK 7. After acquisition costs, Direktronik has affected consolidated profit before taxes by MSEK 6. Direktronik is a part of division Communications. Goodwill consists of the value of the technical expertise the company possesses and synergy effects in the form of co-operating/streamlining with other companies in the division.

Net assets of the acquired entity at the time of acquisition

	Value reported in Direktronik	Fair value adjustment	Fair value in the Group
Intangible non-current assets	-	2	2
Other non-current assets	2		2
Inventories	5		5
Other current assets	6		6
Cash and cash equivalents	6		6
Other liabilities	–5	–1	–6
Net identifiable assets/liabilities	14	1	15
Goodwill			9
Estimated purchase money			24

Note 39 Contingent liabilities

	31/3/2008	31/3/2007
Group
Guarantee undertakings FPG/PRI	1	1
Bank guarantees	3	2
	4	3

Note 40 Earnings per share

	2007/08	2006/07
Earnings per share, SEK	3.92	2.75

The calculation of earnings per share for 2007/08 was based on the year's income attributable to the Parent Company's equity holders amounting to MSEK 91 (65) and a weighted number of shares outstanding during 2007/08 of 23,211,689 (23,677,809).

Instruments that may give rise to future dilutive effect

During 2007/08 the Company had two outstanding call option programmes, the redemption price of which (SEK 36.00 and SEK 44.40, respectively) exceeded the average market price of the shares (SEK 33.40 per share). These options are therefore regarded as having no dilutive effect and have been excluded from the calculations of earnings per share after dilution. Refer to Note 6 for a description of the option programme. If the market price of the share at some future point in time reaches a level over the redemption price, these options will entail dilution. Repurchased shares are used as a hedge for this programme.

Note 41 Risk management

Financial risks

Efficient and systematic risk evaluation of financial risks as well as business risks is essential to Lagercrantz. Lagercrantz Group's model for risk management does not involve avoidance of risk, but is rather aimed at identifying, managing and pricing these risks.

The Board of Directors of Lagercrantz is responsible for adopting the finance policy that sets guidelines, goals and limits for financial management within the Group. The finance policy governs the distribution of responsibility between the Board of Directors of Lagercrantz, Group management and the subsidiaries. Group management has the operative responsibility to secure the Group's financing and to manage cash liquidity, financial assets and liabilities in an efficient manner.

Foreign exchange risk

Despite the fact that Lagercrantz has an international presence, its operations are local in nature as far as foreign exchange risk is concerned. Foreign exchange risk is the greatest financial risk to which Lagercrantz Group is exposed. It is defined as the risk for negative effect on profit caused by foreign exchange fluctuations. Foreign exchange rate fluctuations affect the Company's profit, equity and competitive situation in different ways:

• Profit is affected when sales and purchases are in different currencies (transaction exposure).
• Profit is affected when assets and liabilities are in different currencies (translation exposure).
• Profit is affected when profit of subsidiaries in different currencies is translated into Swedish kronor (translation exposure).
• Equity is affected when the subsidiaries' net assets in different currencies are translated into Swedish kronor (translation exposure).

Transaction exposure

In an internationally active trading company such as Lagercrantz Group it is important to offer customers and suppliers opportunities to pay in their own currency. This means that the Group continually assumes currency risks, both in terms of trade receivable and trade payables in foreign currency.

Since the largest part of sales is in the Nordic Region, Lagercrantz Group has a surplus of foreign currency flows in that region. These flows are exposed to transaction risks. The Group's purchases and sales in important foreign currencies amounted to MSEK 1,391 and MSEK 1,628, respectively, during the year.

Purchases/sales in important currencies

Amounts in MSEK	Purchases	Sales
USD	261	166
EUR	751	738
GBP	18	35
DKK	324	502
NOK	19	157
JPY	18	30
Group total	1,391	1,628

Cash and cash equivalents by currency

Amounts in MSEK	31/3/2008	31/3/2007
SEK	9	7
USD	11	4
EUR	32	28
DKK	8	33
NOK	8	16
Övriga valutor	11	6
Group total	79	94

According to the guidelines of Lagercrantz Group, its foreign exchange exposure should be reduced to a certain extent. Currency exposure that arises is eliminated to the greatest extent possible by currency clauses and invoicing in the same currency as that in which purchases are made. Forward cover of day-to-day exposure to foreign currency is

Note 41 cont'd

used sparingly. The long-term benefit of forward foreign exchange cover is deemed to be small in combination with the growing complexity of reporting financial derivative instruments.

Translation exposure in the balance sheet

An individual subsidiary should normally have no translation risk in its own balance sheet. This means that a subsidiary's receivables and liabilities in foreign currency should be balanced. Subsidiaries also normally do their borrowing in their own currency. In practice, this only comes into play when loans are raised in conjunction with the acquisition and in the case of loans between subsidiary and parent company. Equity in foreign Group companies is normally not hedged since investments in subsidiaries are considered to be of a long-term character. There may be exceptions, however. The translation exposure in consolidated equity can, during certain periods with sharp foreign currency rate fluctuations, be substantial. The largest exposures are in DKK, EUR and NOK. The effect of translation differences on equity is set forth in the summary of changes in shareholders' equity.

Currency sensitivity

As a rule of thumb it can be said that a change of the euro exchange rate by plus or minus 5 percent is estimated to change Lagercrantz Group's operating profit by plus or minus MSEK 1 on an annual basis, given the conditions that prevailed during the financial year. A change of the US dollar exchange rate by 5 percent would give a corresponding effect of MSEK 2.

Experience shows that foreign exchange rate changes also have other indirect effects on earnings, and that actions are taken on a day-to-day basis to minimise the negative effects of foreign exchange rate fluctuations. This makes the ultimate effects on earnings difficult to predict and analyse. The rule of thumb should therefore be used with caution.

Interest risk

The Group's financial policy states that borrowing and the term of fixed interest on borrowing should be up to the period during which a borrowing need is deemed to exist. The overarching policy is that up to 50 percent of the borrowing should be for a term of one to five years. A company's exposure arises in two ways:

• The company may have invested in interest-bearing assets the value of which changes when there is an interest rate change.
• The cost of the company's borrowing may change when the interest rate level changes.

Lagercrantz Group has no long-term surplus liquidity and does not normally invest funds in anything but short-term bank deposits/short-term money market instruments with a term of less than 90 days. As a consequence, there is no appreciable interest rate risk in the Group's short-term investments. Changes in the interest rate level therefore primarily affect the Company's borrowing cost. A change in the weighted average interest rate by 1 percent for the Group is expected to affect the interest expense before taxes by approximately MSEK 2 on an annual basis, given the conditions that prevailed during the financial year. An interest rate hedge has been acquired in an amount of MSEK 100. Interest on this amount will not exceed 4.55 percent over the next four years. The Group's goal is to have a well balanced liquidity reserve available in the form of cash and cash equivalents and committed credit facilities.

Weighted average effective interest rates on loans, %

	Group		Parent Company
	2007/08	2006/07	2007/08	2006/07
Long-term liabilities
to credit institutions Short-term liabilities	4.09%	3.92%	4.04%	3.95%
to credit institutions	4.53%	3.44%	4.52%	3.43%

Credit risk

Lagercrantz Group's credit risk with respect to trade receivables is highly diversified through a large number of projects and other business agreements of varying size and type, with a large number of customer categories in a large number of geographic markets. The Company therefore has no significant concentration of credit risks. Financial credit and counterparty risk is identified, managed and reported in accordance with the framework defined in the Group's finance policy, risk policy and rules of attestation. In connection with financing of projects and other business agreements Lagercrantz may in certain cases assume responsibility for bank guarantees, in the form Parent Company guarantees towards a third party, for the purpose of securing financing during a limited period of time. According to the finance policy, as few credit counterparties as possible shall be strived for and they should always be highly creditworthy.

No material losses of a financial character were sustained during the year.

Liquidity risk

Established relationships with the capital markets is a prerequisite for Lagercrantz Group's prospects for securing a supply of capital on a long-term basis on terms and conditions adjusted to conditions on the market. Given the credit facilities in place, there is good preparedness for temporary fluctuations in the Group's liquidity needs.

• Lagercrantz Group's confirmed bank credit facilities consist of:
• Acquisition loan in the amount of MSEK 88
• Committed credit facility in the amount of MSEK 250 in the Parent Company
• Committed credit facilities in the amount of MSEK 56 in subsidiaries

Capital risk

The Group's goal with respect to its capital structure in line with the purpose of securing the ability to continue operations, allowing it to continue generating a return to its shareholders and benefits for other stakeholders, and to maintain a capital structure that gives a low overall capital cost.

The risk inherent in the Group's level of capital is judged in terms of equity ratio and interest coverage ratio. The present levels of these metrics adequately fulfil the requirements imposed by providers of capital.

Note 42 Related party disclosures

Related party relationships

The Parent Company has a related party relationship with its Group companies. The Company's directors and their family members control approximately 22 percent of the Company's votes.

Related party transactions

The Parent Company invoices subsidiaries for intra-Group services. Sales have occurred between Group companies in small amounts. Transactions are at terms and conditions in line with market conditions. No other purchases and sales have occurred between the Parent Company and Group companies.

Note 43 Events after the balance sheet date

On 1 April 2008 Lagercrantz Group acquired all shares outstanding in CAD Kompagniet A/S for MDKK 24. CAD Kompagniet has 40 employees and revenue of MDKK 29 during 2007, with a profit after net finance items of MDKK 3. CAD Kompagniet conducts consulting operations in the CAD area (computer-aided design) and will be inter-acting with the software business in this field today conducted by Lagercrantz Group in division Communications. The acquisition is expected to contribute positively to earnings per share during the financial year beginning 1 April 2008. The acquisition was made via the Danish subsidiary Betech Data A/S. CAD Kompagniet will be a part of division Communications.

Net assets of the acquired entity at the time of acquisition, MSEK

	Value reported in CAD Kompagniet A/S	Fair value adjustment	Fair value in the Group
Intangible non-current assets	-		-
Other non-current assets	0		0
Other current assets	6		6
Interest-bearing liabilities	0		0
Long-term liabilities	–1		–1
Other liabilities	–3		–3
Net identifiable assets/liabilities	2	-	2
Surplus values*			28
Purchase money paid			30

* Final distribution of surplus values not completed.

Note 44 Information about Lagercrantz Group AB

Lagercrantz Group AB (publ) with its registered office in Stockholm, Box 3508, Torsgatan 2, SE-103 69 Stockholm, Sweden. Corporate identity number 556282-4556.

The Company's primary object is to deal in and manufacture products in the fields of data and electronics - either itself or through wholly or partially owned Group companies - and to engage in other business compatible therewith. The average number of employees for the year is 10. The Parent Company's shares are registered with OMX Nordic Exchange.

Audit Report

To the annual meeting of the shareholders of Lagercrantz Group AB Corporate identity number 556282-4556

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 Lagercrantz Group AB for the financial year 1 April 2007–31 March 2008. The annual accounts and the consolidated accounts of the company are included in the printed version of this document on pages 28–53. 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 the 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 any 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 statements and balance sheets of the parent company and 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 members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm, 25 June 2008

KPMG Bohlins AB

George Pettersson Authorized Public Accountant

Corporate Governance

Lagercrantz Group AB is a Swedish public company with its registered office in Stockholm. The Company deals in technology and is listed in Stockholm since 2001. Steering, management and control is divided in accordance with the Swedish Companies Act and the Articles of Association among the shareholders at the general meeting of shareholders, the Board of Directors and the President and Chief Executive Officer.

The owners' governance of the Company and the Group is based on the Swedish Companies Act and a number of other Swedish and foreign laws and regulations. Control is also exercised by a listing agreement between the Company and OMX Nordic Exchange Stockholm, where the Company's shares are listed. Lagercrantz Group has also been influenced by the Swedish Code of Corporate Governance, but does not fully apply the code. As from 1 July 2008, Lagercrantz is implementing the code.

GENERAL MEETING OF SHAREHOLDERS

The general meeting of shareholders is the highest decision-making body in Lagercrantz Group AB. There shareholders exercise their influence through discussions and decisions.

All shareholders of record five days before the general meeting of shareholders may participate, personally or via proxy. Notice must be given in accordance with the terms of the notice to attend. Lagercrantz Group's regularly scheduled Annual General Meeting shall be held in Stockholm within six months of the end of the financial year. The notice to attend is published in Dagens Industri and Post och Inrikes Tidningar, and is published on the Company's website – www.lagercrantz.com.

The Annual General Meeting appoints the Board of Directors and the auditors and sets their fees. The Annual General Meeting also adopts the financial statements and decides on the allocation of earnings and on discharge from liability for the Board of Directors and the President. The Annual General Meeting also decides on the form for appointment of an election committee. The 2007 Annual General Meeting authorised the Board of Directors to decide on acquisition and transfer of the Company's own shares. Shareholders representing approximately 50 (53) percent of the number of votes in the Company participated at the 2007 Annual General Meeting.

ELECTION COMMITTEE

The principal task of the Election Committee is to make proposals for directors, chairman and auditors, and to make proposals for the fees to be paid in such a way that the Annual General Meeting can pass a well-founded resolution. The 2007 Annual General Meeting resolved to give the Chairman of the Board of Directors the assignment of contacting the largest shareholders by voting power as of 31 December 2007 and request them to appoint members, who together with the Chairman of the Board of Directors would constitute the Election Committee. In accordance therewith, an Election Committee has been appointed, consisting of:

• Anders Börjesson, Chairman of the Board of Directors

• Tom Hedelius

• Pär Stenberg

• Kerstin Stenberg, SwedbankRobur fonder
• Erik Sjöström, Skandia Liv

The Election Committee has access to the evaluation made by the Board of Directors of its work. The proposal of the Election Committee is published in connection with the notice for the Annual General Meeting and is also made available at the Company's website. The mandate period of the Election Committee lasts until a new Election Committee has been appointed. No fees are payable for Election Committee work.

BOARD OF DIRECTORS

It is the duty of the Board of Directors to manage the affairs of the Company in the best possible way and in so doing look after the interests of the shareholders. Lagercrantz Group AB's Board of Directors consists of five regular members who together represent broad commercial, technical and public experience. The 2007 Annual General Meeting elected the following Board of Directors: Pirko Alitalo

• Anders Börjesson, Chairman of the Board of Directors
• Tom Hedelius
• Lennart Sjölund
• Jörgen Wigh, President and CEO

CHAIRMAN OF THE BOARD OF DIRECTORS

The Chairman of the Board of Directors leads the work of the Board of Directors and has a special responsibility to follow the Company's development between the Board of Directors meetings, and to ensure that the members of the Board of Directors are provided with the information necessary to perform satisfactorily. The Chairman maintains contact with the President and the Executive Vice President and holds meetings with them as needed. The Chairman is also responsible for evaluation of the work of the Board of Directors and for the Election Committee being informed of the result of such evaluation.

WORK OF THE BOARD OF DIRECTORS

The Board of Directors held six meetings during the 2007/08 operating year during which minutes were taken, one of which was a statutory Board of Directors meeting in conjunction with Annual General Meeting. The Board of Directors has rules of procedure that are confirmed on an annual basis at the statutory Board of Directors meeting. The rules of procedure lay down the division of labour between the Board of Directors and the President, the Chairman's and the President's responsibility and the forms for the financial reporting. The President is a member of the Board of

Directors and submits reports at the Board of Directors meetings. The Board of Directors has appointed the Executive Vice President, to serve as Secretary. The Board of Directors has a quorum when at least four directors are present and decisions are made if possible after discussion that leads to consensus. All Directors were present at all meetings during the year.

On the agenda for each of the regularly scheduled Board of Directors meetings is the Company's economic and financial position, as well as acquisitions. The Board of Directors regularly gets information in writing about the Company's operations, and other information which is of importance to the Company. During 2007/08 the Board of Directors paid special attention to matters dealing with acquisitions and growth. The Board of Directors also held one meeting aimed solely at the Group's position and strategy. The work of the Board of Directors is evaluated on an annual basis. The Board of Directors dealt with this evaluation at its meeting during the month of February.

FEES TO THE BOARD OF DIRECTORS

The total fee paid to the Board of Directors of Lagercrantz Group AB for 2007/08 amounted to SEK 950 (950) thousand. In accordance with the resolution of the Annual General Meeting, the Chairman received SEK 350,000, Vice Chairman SEK 250,000 and the other Directors who are not in the Company's employment received SEK 175,000 each.

COMPENSATION COMMITTEE

Within itself the Board of Directors has appointed a compensation committee, the task of which is to draw up guidelines for compensation to members of the President & CEO and other members of senior management. The Committee also has the task of following up and implementing the resolution of the Annual General Meeting with respect to principles for compensation to members of senior management. The Compensation Committee consists of Chairman of the Board, Anders Börjesson, and Vice Chairman of the Board of Directors, Tom Hedelius. The President & CEO presents reports, but does not participate in compensation issues that concern himself. The Committee held one meeting during the year.

AUDIT AND AUDIT COMMITTEE

The Board of Directors has appointed an audit committee consisting of all directors with the exception of the President & CEO. In view of the size and business of Lagercrantz Group, the Board of Directors is of the opinion that this is most appropriate. The Audit Committee has at its disposal an internal control group consisting of persons independent of corporate management. The task of this group is to review the Group's internal control routines and compliance therewith and to report its findings and recommendations to the Board of Directors.

In order to ensure transparency and control, the Board of Directors is annually given an opportunity to offer its views on the auditors' planning and scope of the audit. After completion of their audit, the auditors report on their findings at a Board of Directors meeting held in May. In addition hereto, the auditors are offered to attend Board of Directors meetings when the Board of Directors or the auditors consider that there is a need for such attendance.

AUDITORS

Registered auditing firm KPMG Bohlins AB was elected as the Company's auditor at the 2005 Annual General Meeting until and including the 2009 Annual Meeting. Within itself, KPMG has appointed Authorised Public Accountant George Pettersson to audit the Company's and the Group's Annual Accounts and the management by the Board of Directors and the President & CEO.

PRESIDENT & CEO AND MANAGEMENT GROUP

The President & CEO and Group management draw up and implement Lagercrantz Group's over-arching strategies and deal with issues such as acquisitions, disposals and major capital expenditures. Such issues are prepared by Group management for decision by the Board of Directors of the Parent Company. The President & CEO is responsible for day-to-day management of the Company in accordance with the decisions and guidelines of the Board of Directors. Lagercrantz Group's Group management consists of a President & CEO, Executive Vice President and the officer responsible for business development. There is also a senior management group consisting of Group management and the division heads. The management group meets on a monthly basis to discuss the results and financial position of the Group and the subsidiaries, as well as issues concerning strategy, earnings follow-up, forecasts and business development. Among the tasks are also issues pertaining to acquisitions, joint projects, the Group's financial reporting, communication with the stock market, internal and external information and follow-up of security, environment and quality.

OPERATIVE CONTROL

The Group's operative control is exercised in subsidiaries of Lagercrantz Group. Active board-of-directors work is conducted in all subsidiaries under the leadership of the division heads. Subsidiary Boards of Directors follow day-to-day operations and adopt business plans. Operations are conducted in accordance with the rules, guidelines and policies laid down by the Parent Company, and by guidelines set by each respective subsidiary Board of Directors. Subsidiary heads have profit centre responsibility for their respective companies, and responsibility to ensure growth and development within their respective companies. The distribution of capital expenditure funds within the Group takes place after decisions by the Board of Directors of the Parent Company, Lagercrantz Group, in accordance with an annually updated capital expenditure policy.

INTERNAL CONTROL

Internal control is intended to ensure the Company's strategies and goals are followed up and that the investment of the Company's shareholders is protected. It is also intended to ensure that all information to the stock market is reliable, relevant and in conformity with generally accepted accounting standards, and that law, regulations and other requirements on listed companies are observed within the entire Group. The Board of Directors of Lagercrantz Group has delegated this responsibility to the other members of management and to subsidiary chief executives. There are control activities throughout the organisation at all levels. Follow-up is included as an integral part of the day-to-day work of management.

Pirkko Alitalo, born 1949. Director. Bachelor of Science (Econ.) Director of Svenska Handelsbanken AB. Shares owned: 5,000 class B shares. Director since 2001.

Lennart Sjölund, born 1949. Director. Bachelor of Science (Econ.) Chairman of Quickcool AB. Director of Godiva AB and ErySave AB. Shares owned (family): 80,000 class B shares. Directors since 2001.

Anders Börjesson, born 1948. Chairman. Bachelor of Science (Econ.) Chairman of Addtech AB, Boomerang AB, Bostad Direkt AB and Cibenon AB. Vice Chairman of B&B Tools AB. Director of Inomec AB and Futuraskolan AB. Shares owned (family): 377,982 class A shares and 65,500 class B shares. Director since 2001.

Jörgen Wigh, född 1965. President and CEO. Bachelor of Science (Econ.) Shares owned: 6,720 class A shares, 28,000 class B shares and 80,900 call options on class B shares. Director since 2006.

and Auditors

Board of Directors

Tom Hedelius, born 1939. Vice Chairman. Bachelor of Science (Econ.) Doctor h.c. Economics. Honorary Chairman of Svenska Handelsbanken AB. Chairman of Anders Sandrews stiftelse, B&B Tools AB, Industrivärden AB and Jan Wallanders and Tom Hedelius stiftelse. Vice Chairman of Addtech AB. Director of SCA AB, Volvo AB and L E Lundberg Företagen AB. Shares owned (family): 362,982 class A shares and 5,400 class B shares. Director since 2001.

Auditors

Auditors appointed by the 2005 Annual Meeting are the registered auditing company KPMG Bohlins AB. Auditor in charge is George Pettersson, Authorized Public Accountant.

Management

1 Magnus Söderlind, born 1966. Vice President Business Development. Responsible for business development. Bachelor of Science (Econ.) Shares owned: 3,000 class B shares And 22,000 call options for class B shares. 2 Niklas Enmark, born 1972. Executive Vice President and Chief Financial Officer. Bachelor of Science (Econ.) Shares owned: 6,000 class B shares and 47,000 call options for class B shares.

3 Ulf Gladh, born 1961. Vice President Electronics Product area Embedded Systems. Shares owned: 10,000 class B shares and 33,000 call options for class B shares.

4 Jörgen Wigh, born 1965. President and Chief Executive Officer. Bachelor of Science (Econ.) Shares owned: 6,720 class A shares, 28,000 class B shares and 80,900 call options on class B shares.

5 Per Ikov, born 1961. Vice President Business Development. Bachelor of Science (Econ.) Shares owned: 9,600 class B shares and 27,000 call options for class B shares. 6 Anders Arthur, born 1960. Vice President Electronics / Communications Product area Wireless Industrial Communication and Design Software Shares owned: 34,400 call options

for class B shares.

7 Gunnar Almeling, born 1956. Vice President Mechatronics. Shares owned: 1,800 class B shares and 33,000 call options for class B shares.

8 Anders Larsson, born 1961. Group Controller. Shares owned: 4,000 class B shares and 11,800 call options for class B shares. 9 Kjell Eriksson, born 1954. Vice President Communications Product area Digital Image Transmission/Technical Security. Shares owned: 33,000 call options for class B shares.

LAGERCRANTZ GROUP AB

Torsgatan 2 P.O. Box 3508 SE-103 69 Stockholm SWEDEN Tel: + 46 8 700 66 70 Fax: + 46 8 28 18 05 www.lagercrantz.com

ELECTRONICS

ACTE A/S

Vallensbaeksvej 41 DK-2605 Brøndby DENMARK Tel: + 45 46 900 400 Fax: + 45 46 900 500 www.acte.dk

ACTE AS

P.O. Box 190 Vestvollveien 10 NO-2021 Skedsmokorset NORWAY Tel: + 47 63 898 900 Fax: + 47 63 879 000 www.acte.no

ISIC A/S

Edwin Rahrs Vej 54 DK-8220 Brabrand DENMARK Tel: + 45 70 207 077 Fax: + 45 70 207 976 www.isic.dk

ACTE OY

P.O. Box 36 Larin Kyöstin tie 4 FI-00641 Helsinki FINLAND Tel: + 358 9 752 761 Fax: + 358 9 752 766 59 www.acte.fi

ACTE EMBEDDED

TECHNOLOGY AB P.O. Box 13 Allén 6 A, Sundbyberg SE-601 02 Norrköping SWEDEN Tel: + 46 8 445 28 00 Fax: + 46 8 98 26 19 www.acteembedded.se

ACTE WIRELESS AB

P.O. Box 4115 Allén 6 A, Sundbyberg SE-171 04 Solna SWEDEN Tel: + 46 8 445 28 00 Fax: + 46 98 26 19 www.actewireless.se

UNITRONIC AG

Mündelheimer Weg 9 DE-40472 Düsseldorf GERMANY Tel: + 49 211 951 10 Fax: + 49 211 951 11 11 www.unitronic.de

SECOS G MBH

Zugerstrasse 74 CH-6341 Baar SWITZERLAND Tel: + 41 41 769 3538 Fax: + 41 41 769 3539 www.secos.ch

ACTE SP. Z O.O.

ul Krancowa 49 PL-02-493 Warsawa POLAND Tel: + 48 22 336 02 00 Fax: + 48 22 336 02 01 www.acte.pl

IWSFE SP. Z O.O.

146 D Jerozolimskie Avenue PL-02-305 Warsawa POLAND Tel: + 48 22 257 02 40 Fax: + 48 22 257 02 40 www.iwsfe.com

ACTE COMPONENTS LTD

2.2 Intec Business Park Wade Road, Basingstoke Hampshire, RG24 8NE, UK UNITED KINGDOM Tel: + 44 1 256 845 888 Fax: + 44 1 256 333 031 www.actecomponents.co.uk

LAGERCRANTZ ASIA CO LTD

Room 707 & 709, 7F, Premier Centre 20 Cheung Shun Street Cheung Sha Wan, Kowloon HONG KONG Tel: + 85 2 274 318 16 Fax: + 85 2 274 225 06 www.lagercrantz-asia.com

MECHATRONICS

ELFAC A/S

Priorsvej 23 DK-8600 Silkeborg DENMARK Tel: + 45 86 801 555 Fax: + 45 86 824 050 www.elfac.dk

EFC FINLAND OY

Nyåkersvägen 6 FI-65610 Korsholm FINLAND Tel: + 358 6 322 62 22 Fax: + 358 6 322 62 00 www.efc.fi

KABLAGEPRODUKTION

I VÄSTERÅS AB Omformargatan 12 SE-721 37 Västerås SWEDEN Tel: + 46 21 81 51 51 Fax: + 46 21 81 51 61 www.kablageproduktion.com

ACTE SUPPLY AB

P.O. Box 13 Allén 6 A, Sundbyberg SE-601 02 Norrköping SWEDEN Tel: + 46 8 445 28 00 Fax: + 46 8 98 26 19 www.acte.se

ELPRESS AB

P.O. Box 186 Industrivägen 15 SE-872 24 Kramfors SWEDEN Tel: + 46 612 71 71 00 Fax: + 46 612 130 20 www.elpress.se

COMMUNICATIONS

ISG SYSTEMS AB

Sporthallsvägen 10 SE-263 34 Höganäs SWEDEN Tel: + 46 42 36 21 40 Fax: + 46 42 36 21 49 www.isg.se

STV VIDEO DATA AB

Anderstorpsvägen 12, 2tr SE-171 54 Solna SWEDEN Tel: + 46 8 568 441 00 Fax: + 46 8 568 441 01 www.stv.se

NORDIC ALARM AB

Englundavägen 11 SE-171 41 Solna SWEDEN Tel: + 46 8 27 27 27 Fax: + 46 8 735 52 58 www.nordicalarm.se

HEATH COMM AS

P.O. Box 7265 C. Sundtsgate 29 NO-5020 Bergen NORWAY Tel: + 47 55 304 600 Fax: + 47 55 304 602 www.heathcomm.no

LAGERCRANTZ

COMMUNICATION AB P.O. Box 6004 Korta Gatan 9 SE-171 54 Solna SWEDEN Tel: + 46 8 626 41 00 Fax: + 46 8 754 77 59 www.lagercrantz.se

BETECH DATA A/S

Herstedvang 7C, 2. Sal DK-2620 Albertslund DENMARK Tel: + 45 43 487 470 Fax: + 45 43 487 488 www.betechdata.dk

K & K ACTIVE OY

Itälahdenkatu 22 B FI-00210 Helsinki FINLAND Tel: + 358 9 6855 0550 Fax: + 358 9 6855 0551 www.kandk.fi

K & K SALES OY

Itälahdenkatu 22 B FI-00210 Helsinki FINLAND Tel: + 358 9 6855 0550 Fax: + 358 9 6855 0551 www.kandk.fi

DIREKTRONIK AB

P.O. Box 234 Konsul Johnsons väg 15 SE-149 23 Nynäshamn SWEDEN Tel: + 46 8 52 400 700 Fax: + 46 8 520 181 21 www.direktronik.se

CAD KOMPAGNIET A/S

Dampfærgevej 8 DK-2100 Köpenhamn DENMARK Tel: + 45 70 22 22 17 Fax: + 45 70 22 22 84 www.cad-komp.dk

Lagercrantz Group AB (publ) P.O. Box 3508 SE-103 69 Stockholm, Sweden

Tel + 46 8 700 66 70 Fax + 46 8 28 18 05

www.lagercrantz.com

Corporate identity number 556282-4556 Registered office Stockholm