Munters Group — Annual Report 2009

Feb 12, 2009

Contents

• Group overview 1
• CEO's statement 2
• Strategic focus 4
• Business focus 7
  • Personnel 12
• Dehumidification division 14
• HumiCool division 20
• Moisture Control Services (MCS) division 26
• Risks and risk management 32
• The share and shareholders 34
• Corporate governance report 36
• Board of Directors and Auditors 40
  • Board of Directors' report 42
  • 10-year review 46
  • 12-quarter review 48
  • Income statement 50
  • Cash-flow statement 51
    • Balance sheet 52
• Statement of the Group's recognized income and expenses 54
  • Parent Company accounts 55
  • Accounting principles and notes 57
  • Proposed distribution of earnings 82
  • Auditor's report 83
    • Management 84
  • Definitions of financial key figures and glossary 85

The Board of Directors' report compises pages 42–45 and page 82.

Financial information
Annual General Meeting	April 15
Interim report January – March	April 23
Interim report January – June	July 22
Interim report January – September	October 28
Year-end report 2009	February 9, 2010
Annual Report 2009	March 2010
Interim report January – March	April 22, 2010
Interim report January – June	July 22, 2010

Munters' annual report in Swedish and English is only sent to shareholders and other stakeholders who specifically request it.

Cover photo: Even in extreme climates, people must provide for their families. Buildings for schools, hospitals, markets and recreation are also needed in these locations. Munters is a leading supplier of energy-efficient air treatment solutions that creates an optimal indoor climate in buildings and for industrial processes, regardless of the outdoor climate.

The year in brief

• Order intake amounted to SEK 6,515 M (6,407), an increase of 2 percent.
• Net sales amounted to SEK 6,570 M, an increase of 5 percent.
• Net earnings declined to SEK 165 M (336).
• Earnings per share amounted to SEK 2.21 (4.49).
• The Board of Directors' propose that no dividend be paid for 2008.

Key data Adjusted

	2008	2007	Change, %	change, %1
Order intake, SEK M	6,515	6,407	2	0
Net sales, SEK M	6,570	6,262	5	3
EBIT, SEK M	362	566	–36
EBIT margin, %	5.5	9.0
Earnings after financial items, SEK M	285	526	–46
Net earnings, SEK M	165	336	–51
Net margin, %	2.5	5.4
Earnings per share, SEK	2.21	4.49
Operating cash flow, SEK M	177	189	–6
Return on equity, %	13.8	25.7
Return on capital employed, %	13.6	24.8
Return on operating capital, %	18.5	31.8
Capital turnover rate, multiple	2.4	2.7
Net debt, SEK M	1,390	1,068
Equity ratio, %	28	31
Number of permanent employees at year-end	4,132	4,043	2

1 Adjusted for exchange-rate changes, acquisitions and divestments.

Munters in brief

Two product divisions focused on industrial-process air treatment, comfort-oriented climate control and climate control for the AgHort industry. A global service division with world-leading positions in damage restorations and temporary climate control.

Manufacturing, sales and service are conducted with slightly more than 4,100 employees in more than 30 countries. The Munters' share has been listed on the NASDAQ OMX Stockholm Exchange in the Mid-Cap segment since 1997.

Only major units. Service depots and smaller sales offices not shown.

Dehumidification

Products and complete solutions for controlling humidity. Customer manufacturing processes and warehousing are made more efficient. Product quality, shelf life and hygiene are improved. Dehumidification in combination with cooling creates an ideal indoor climate.

Dehumidification division's share of:

HumiCool

Products and systems for evaporative cooling and humidification. Cooling systems for the poultry and horticulture industries. Technique and products for mist elimination, e.g. for treatment of flue gases.

HumiCool division's share of:

Moisture Control Services (MCS) MCS division's share of:

Services for water and fire damage restoration and temporary climate control. A complete service offering for the insurance industry that lowers costs through drying and renovating rather than rebuilding.

Energy-efficient technologies and customized solutions

Ingress Em velendit doloreet, suscilla feuguer cidunt autem zzriure conulpute consectet, quis ad moluptatuer susciduismod ex eu feu feum do od diam veliquat auguera estrud endrerat, conum zzrit utpatummy niat accum diam quis am il dolessent nullandipit alit luptat, quisit aci tio odolendrem iurero do del dion vel ut at. Ut autetum sandigna facilis do core faccum zzrilisl dolobore vero consendre Munters' vision is to be a leading global supplier of energyefficient solutions for air treatment and damage restoration based on its expertise in technologies for humidity and climate control.

Strategic focus

From a strong base in humidity control, the business concept is gradually expanded to adjacent areas. In this process, Munters continues to focus on customer application-driven, energy-efficient, high-quality product solutions and services that are closely related to Munters' traditional area of expertise. By broadening the product and service portfolio and through forward integration, Munters is taking a larger part of the value chain in selected niches while increasing its market potential.

An important part of strategy work is to further strengthen the company's position to leverage the following global trends:

• Increased demand for energy-efficient and environmentally friendly solutions
• Increased demands on indoor climate
• Consolidations and quality requirements within food production and distribution
• Consolidation within the insurance industry
• Economic expansion in Asia.

faciliquat, quat. Uptatum zzril eui eu feugue facing enim More efficient product development – global platforms

Positive effects from strategic initiatives when markets recover

Munters' development during 2008 was characterized by a relatively strong first half of the year, which was followed by a significantly tougher business climate as a result of the general economic recession and the current financial crisis. The MEP2 action program to increase efficiency in all divisions had already been announced at the beginning of the year. During the second half of the year, we took additional actions to adapt the organization to the prevailing market conditions. These measures are expected to improve our structure and competitiveness and to have positive effects on profitability when market conditions become more favorable.

Our three divisions were affected to varying degrees by the recession and difficulties within several customer segments in obtaining financing. Historically, Munters' business has not been strongly linked to general economic cycles. However, the financial crisis has resulted in several businesses that are not normally sensitive to economic cycles experiencing weaker sales due to difficulties among customers in obtaining financing. The products that we sell through distributors were particularly affected by cautiousness on the part of distributors in investing in inventories.

Development in the divisions

The Dehumidification division experienced stable growth during the preceding year and only noted some weakening in the European market for industrial systems toward the end of the year. In the US, sales in the Commercial segment developed very favorably as a result of the new, more energy-efficient products deriving from the 2007 acquisition of Des Champs Technologies. Within the Industrial segment, demand was favorable during most of the year, with strong sales to the two most important customer groups, the pharmaceuticals and the food industries. A contract was signed during the year with a large, global pharmaceutical company, which gave us the assignment to review all installations of dehumidification systems in the company's global production structure and to upgrade them with the latest technology to save energy.

The HumiCool division was most severely affected by the business climate. The largest business area, AgHort, which sells climate systems to breeding houses and greenhouses, experienced an unexpectedly sharp decline during the fourth quarter as a result of insufficient financing options among end-customers. Also within HVAC, where a large proportion of sales comprise mobile heaters, the decline as a result of the financial crisis was substantial. Demand from many small customers collapsed, and distributors became very cautious in inventory management. Not least within mist elimination, order bookings from coal-fired power plants were weak throughout the year. In the important US market, this was primarily a result of opportunities for trading in sulfur emission rights across state lines being eliminated. The investment calculations for coal-fired power plants wanting to invest in better cleaning technology were thus weakened.

MCS, our service division, experienced favorable growth during the year. Assignments related to the hurricanes Ike and Gustav contributed to a strong year for the division in the US. The trend for insurance companies to sign more framework agreements with the major restoration companies continued. This has proven very favorable for MCS, and the division won several new contracts during the year. In addition to investments linked to the MEP² efficiency program, MCS incurred substantial non-recurring costs related to structural changes. These costs included preparations for phasing out certain operations.

Strategic initiatives during the year

MEP2 strengthens our efficiency and profitability At the beginning of 2008, an efficiency improvement program designated MEP² was launched. The program was intended to increase the efficiency of the production structure in our manufacturing divisions through more rational production. Part of the program consisted of transferring a larger share of refinement processes to low-cost countries. During the year, HumiCool transferred production of smaller mobile heaters from Italy to China and corrugation machines from Sweden to Mexico. The substantial volume decline within HumiCool resulted in the division reducing personnel by slightly more than 220 persons during the last three quarters of the year. This corresponded to about 19 percent of the total number of employees in the division.

Within MCS, there was a strong focus on the launch of our mobile IT system Field.Link in our five most important markets. Field.Link demonstrated its improvement potential in the UK and is now being rolled out globally. This will result in a significant improvement in field work, while allowing administration to be centralized, thus increasing quality and lowering costs. This prepares MCS to increase return on capital employed through increased efficiency, a more favorable cost structure and more efficient processes for handling accounts receivable. The system also allows work to be documented in a better manner while making relevant information more accessible for the insurance companies.

Considerable work was also devoted to processes for handling accounts receivable, which have been a recurrent problem for MCS is some markets. Costs associated with this work were to considerable sums. However, we have now

implemented sharply improved global routines that will prevent a reoccurrence of the corresponding costs. The MEP² program was concluded according to plan at the end of 2008.

Munters leads development in energy-efficient air treatment Des Champs Technologies, which was acquired in 2007, is now fully integrated in the Munters organization. We have also strengthened and enhanced our expertise in research and development. As a result of this combination, we introduced a new generation of products at the beginning of 2008 under the name DryCool. These products, which combine Des Champs' expertise in heat-exchange technology with Munters' expertise in energy-efficient cooling and dehumidification, significantly strengthened Munters' position as the leading player in energyefficient air treatment. The patented DryCool products were very well received in the US market and resulted in rapid sales growth in the commercial sector, primarily to completely new customers. As the next step in our strategy, we acquired Toussaint Nyssenne in Belgium during the fourth quarter. Toussaint Nyssenne, now called Munters Belgium, will be our base for manufacturing and introducing DryCool, as well as our successful DesiCool products, in Europe.

Priorities for 2009

The prevailing market conditions mean that our divisions are continuing to adapt their respective resources to current business volumes through efficiency-enhancing measures and personnel reductions. During the first quarter, we took measures to improve the production structure, to increase administrative efficiency and to reduce costs at all levels. Furthermore, we will phase out certain operations within MCS in which our new business model will not result in the improvements required to achieve sustainable and favorable profitability. These measures include personnel reductions of about 250 persons for the Group and are estimated to cost between SEK 30 and 45 million. After full implementation, the result will be cost reductions of about SEK 75 million per year, excluding discontinued operations.

Within MCS, Field.Link was launched in the first five markets during the fourth quarter of 2008. Field.Link will be introduced in an additional five markets during the current year. The system will result in more efficient operations with growing benefits as implementation continues. Work to utilize capital employed within MCS in an optimal manner will continue to receive high priority.

Within the Dehumidification division, the launch of commercial products in Europe will be given focus through the newly acquired Toussaint Nyssenne. In the US, our goal is to capture additional market shares, primarily within the commercial segment. We expect to achieve this by continuing to develop new products with low energy consumption. Continued growth in Asia is also high on the agenda.

Within the HumiCool division, we will continue to adapt the workforce to lower demand levels and work to improve the production structure. This work will result in a concentration of manufacturing to fewer plants and an increased share in low-cost countries.

Strategy retained

Munters has a unique ability to link technical expertise with application knowledge. Our products and services are well-positioned in relation to the long-term trends driving our market. There is an increasingly greater awareness regarding energy savings and environmental conservation. At the same time, knowledge of the importance of the indoor climate for both health and production processes is increasing. These trends favor Munters, and on the whole, I expect Munters to show continued high organic growth over the long term. Our strategy to broaden our product portfolio by being able to offer the customer an even more comprehensive product and service program is retained. This strategy includes complimentary acquisitions.

In recent years, we have focused strongly on profit-enhancing measures. This should become evident, especially in our gross margin, when the financial crisis is over and the economy recovers again. Although the coming period is characterized by considerable uncertainty, I am convinced that the organization will emerge strengthened from the prevailing recession. From this perspective, I view Munters' future with optimism.

Kista, March 2009

Lars Engström President and CEO

Focus on segments with favorable growth potential

StrateGY

Vision

Munters' vision is to be a globally leading supplier of energyefficient solutions for air treatment and damage restoration based on its expertise in technologies for humidity and climate control.

World-leading position

Munters' world-leading position in energy-efficient regulation of indoor climates was achieved through specialist competence in thermodynamics, application expertise and customer-driven product development. Munters focuses on market segments with favorable growth potential in which the Group can create strong global positions and favorable profitability. By successively broadening the product and service portfolio and through forward integration, Munters takes a larger part of the value chain within selected niches, while at the same time increasing the market potential. The annual value of the potential market is estimated by Munters to amount to nearly SEK 70 billion, of which Munters has a market share of about 10 percent.

Strategic focus

An important part of strategy work is to further strengthen the company's position to leverage the following global trends:

• Increased demand for energy-efficient and environmentally friendly solutions
• Increased demands on indoor climate
• Consolidations and quality requirements in food production and distribution
• Consolidation within the insurance industry
• Economic expansion in Asia.

Munters' strategic initiatives to achieve its overall goals can be summarized in the following illustration:

Goals

Financial targets

Shareholder value must be created through high growth combined with favorable margins and a high capital turnover rate. The Board of Directors has established the following financial targets:

• Sales growth of 10 percent per year over a period of several years
• EBIT margin of 10 percent
• Capital turnover rate a multiple of 3.

Each division and business unit has individual target for these key figures that are adapted to their particular prerequisites.

Operative goals

• Global leadership in selected segments
• Leading in energy efficiency
• High quality and productivity combined with efficient resource utilization through continuous improvement work
• Customer-focused performance culture with a high degree of personal satisfaction and good career opportunities
• High efficiency and short lead times via integrated IT systems.

Capital turnover rate

8

Prioritized activities

Munters' strategic plan is defined for each business unit and has a planning horizon of three years. The plan is revised each year. A number of strategic initiatives are formulated at the division level and specify the business orientation and focus. For the coming three-year period, the three divisions are focusing on the following areas:

Dehumidification division

Dehumidification is focusing on continued profitable growth through geographic expansion in energy-efficient comfort air treatment from the North American platform. The division also prioritizes accelerated product development through cross-fertilization of acquired technology and existing product families. This work will be characterized by modular and global thinking and energy efficiency. In addition, profitability will be improved through more efficient production and administration.

HumiCool division

HumiCool is focusing on long-term profitable growth by increasing the efficiency of the production structure and increasing the share of production in low-cost countries. The division will refine products and systems for the global market based on its core technologies and components. In addition, its position in the value chain will be strengthened through supplementing the product portfolio, application expertise and logistics within selected market segments.

Moisture Control Services (MCS) division

MCS is focusing on strengthening its position as a leading supplier to international players in the insurance industry and property management by offering a total undertaking. Profitability will be increased in core business through the implementation of a new business model based on a mobile IT platform and centralized customer centers. Investment in growth in markets where the market share and the new business model will provide the greatest competitive advantage will be prioritized.

implemented in 2008

During 2008, long-term work to achieve the overall goals and further strengthen the Group's competitiveness continued with undiminished force. A number of strategic initiatives were taken, while others were completed during the year. Completed activities in each of the divisions during the year are summarized below.

Dehumidification division

• Acquisition of Toussaint Nyssenne complements and strengthens offering in Europe
• Strengthening of production capacity and engineering resources in China
• Patenting and launch of DryCool ERV in the US market
• Increased production efficiency and review of administration in the US
• Organizational changes to utilize the sales force and other functions more efficiently for the broadened product portfolio.

HumiCool division

• Supplementing of product offering within AgHort to further strengthen the position as a system supplier
• Transfer of production from high-cost countries to China and Mexico
• Strong development in the system application GTEC, a small but rapidly growing business
• Review of the product range within Mist Elimination with respect to marine and industrial applications.

Moisture Control Services (MCS) division

• Mobile IT system Field.Link for increased efficiency and customer benefit implemented in the first five countries
• Development of routines for pursuing major accounts which resulted in several new major framework agreements with customers during the year
• New organizational structure for more efficient management and reduced costs for local infrastructure
• Rationalizations during the fourth quarter resulted in a reduction of the number of depots, a merger of operations in France and Belgium and reductions in Australia.

Global trends increase demand

By successively broadening its product offering, Munters has increasingly developed into a globally leading supplier of energy-efficient and environmentally friendly solutions for air treatment and damage restoration within selected market segments. The offering, based on expertise in technologies for humidity and climate control, is adapted to customer requirements, follows development and leverages global trends. Several of Munters' products support sustainable development. The Group's values should provide guidance in how business is conducted and permeate work within Munters and relations with the company's stakeholders.

Global trends increase demand

Over the past decade, Munters has developed from a component supplier with its base in dehumidification and humidification to a globally leading supplier of environmentally friendly and energy-efficient solutions for air treatment and damage restoration based on its expertise in technologies for humidity and climate control. By continuously developing new, energy-efficient and environmentally friendly solutions while adapting the product and service offering to customer requirements, the Group is now well-positioned to take advantage of a number of global trends.

Increased demand for energy-efficient and environmentally friendly solutions

The long-term trend of increasing energy prices, together with a greater global environmental awareness and increasingly stricter regulations on emissions increase demand for energy-efficient and environmentally friendly products and production processes. Compared with alternative solutions, Munters' technology often results in lower energy consumption and less resource waste. Several of the Group's products are used to reduce emissions of hazardous substances, such as sulfur dioxide and nitrogen oxide that contribute to the greenhouse effect. Munters' damage restoration services contribute to avoiding demolition and new construction by instead renovating and reusing damaged materials.

Increased demands on indoor climate

Increasingly high demands are being placed on indoor climates in both commercial and industrial premises. Munters' lowenergy solutions for climate control allow customers to reduce resource consumption and environmental impact. Energy is often saved by making insulation denser and reducing ventilation. This often results in problems with mold, moisture and allergies. Munters can reduce these problems in two ways – by installing fixed aggregates that prevent problems from arising and enabling more energy-efficient ventilation or via the MCS service division, which can take care of environments that are already affected.

Economic expansion in Asia

The extensive economic expansion in Asia, primarily in China and India, has created a large population that to an increasing degree is able to adopt Western consumer patterns. This in turn leads to increased demands to improve indoor climates, which benefits products that employ Munters' technology in the manufacturing process. The Munters strategy includes investment in growth in Asia, where China has become a production center for Asia.

Consolidations and quality requirements within food production and distribution

Consumption of meat in developing countries is increasing in pace with improvement in regional economies. This in turn leads to higher prices and a need for more rational production processes. As a result, a global consolidation and regulation of the farming and food industries is now in progress. This trend has resulted in increasing investment in equipment to increase productivity and improve hygiene. By regulating the humidity level in premises for food production and distribution, mold and bacteria growth are prevented, while shelf life and quality are improved. To ensure high production quality, production environments must be identical, regardless of the climate zone. This trend favors Munters, which has a strong brand and an organization that supports a strategy of being global, customer-focused and specialized. Munters has solutions for all levels in the food industry, from production and manufacturing via transports to warehousing and sales in stores. Munters climate control systems for animal breeding increase productivity and reduce the risk of disease.

Consolidation within the insurance industry

An extensive consolidation has been in progress in the insurance industry for a long time. Many insurance companies want to reduce their costs for claims adjustment and restoration by working with fewer national or international suppliers and partners that can take increasingly greater responsibility for administration relating to claims settlement. Munters' service division MCS is positioned to take advantage of this trend through its geographic coverage, long-term national or regional partnership agreements at fixed price levels and its ability to take increasingly greater responsibility for claims settlement and IT-based documentation.

Munters' product offering and services contribute to sustainable development

Munters is a technology company with products and services that contribute to sustainable development. Munters' ambition is to develop its business to achieve sustainable solutions that provide both environmental and financial benefits for its customers and society as a whole. The Group's product divisions, Dehumidification and HumiCool, manufacture and market product solutions that combine low energyconsumption with the lowest possible environmental impact. The MCS division's methods for limiting damage and drying instead of demolition and new construction result in less wasted resources.

Market segments and core technologies

Within the product divisions, the most important segments are:

• Industrial-process air treatment

They remove solvents from emissions from production processes. Manufacturing primarily in the

MDU Zeol Other

US and Germany.

• Comfort-oriented climate control
• Climate control for the AgHort industry
• Flue-gas cleaning for coal-fired power plants.

Within the MCS division, Munters is building on its position as a world leader in damage restoration and temporary climate control.

Munters has a number of core technologies that are applied to these market segments:

• Dehumidification
• Humidification
• Air cooling (direct and indirect evaporative cooling and heating)
• Heat-exchange technology
• Mist elimination.

industry Electronics and semiconductor industry

representatives

Other

for every conceivable environment from restoration of private property to large-scale commercial damage and cleaning after major individual events. Customer value (example) High availability, fast response times and modern technology and work processes enable costeffective and environmentally friendly restoration.

restoration Fire damage restoration Reconstruction Leakage control Other

Water damage

Framework agreements with insurance companies Keya accounts Local sales

Europe Americas Asia

Damage restoration Rest of division

Insurance companies Public buildings Property managers Industry Other

Core values – responsible business conduct

Satisfactory profitability and a strong financial position must create the conditions for Munters to engage in long-term sustainable development for business partners, employees, owners and society. Munters' core values are based on a sustainability perspective and expressed in part in the Group's global Corporate Social Responsibility policy, which includes such subjects as company culture, the environment, quality, work environment, safety, code of conduct, business ethics and corruption and is based on the UN's general declaration of human rights and the International Worker's Organization's basic principles regarding rights in working life. The entire policy is available at www.munters.com. Munters' business is based on these values, which define the Group's basic views. At the same time, the Group's operations are regulated by laws, ordinances, norms and permits in each country in which Munters operates. For Munters, responsible business conduct thus includes economic, ethical, environmental and social responsibility. Munters has three global divisions that operate independently, and decision-making is delegated. Each manager has considerable freedom to exercise his or her responsibility within the framework of the above policies.

The adsorption dehumidifier's rotor contains small air channels with a very large contact surface. The rotor is treated with substances that attract humidity or other substances in the airstream passing through the rotor. When the dehumidifier is in operation, two airstreams pass simultaneously through two sections. One airstream will be dehumidified. The other is warm and is used to dry the rotor so that it can continue to take up humidity. The humidity is carried away in the warm and very moist airstream.

CSR work within the Group began in 2006, and in 2007, Munters' CSR work was made more concrete through focused work in the two product divisions where two tools are used to ensure and verify that business partners work in accordance with Munters' CSR policy:

• Supplier Self-assessment Form a supplier evaluation tool that is also used in the service division
• General Purchase Agreement a standard supplier agreement with penalty clauses for deviations. Penalties are donated without deduction to charities in the area for the breach of contract.

Work in 2008

In recent years, the most important suppliers within the product divisions confirmed that they live up to these requirements. This work with Munters' suppliers is ongoing, and the goal is to constantly increase the number of suppliers that live up to Munters' new requirements.

Within the Dehumidification product division, the plant in Tobo, Sweden signed a contract in 2008 for environmentally labeled electricity with electricity supplies with low carbon-dioxide emissions and a complete specification of the exact environmental impact from start to finish.

Within the MCS division, there were locally adapted activities within the framework of the overall CSR policy. During 2008, a vehicle policy was adopted according to which all service vehicles must be either diesel or hybrid vehicles. In the UK, for example, Munters in 2008 for the third time obtained IiP status (Invest in People), which is a standard for improving a company's earnings through investing in employees. An increasing number of customers, such as the large international insurance companies AXA, Vesta and If, are requiring compliance, follow-ups and reporting of the division's CSR work.

During the 2008 fiscal year, the following Group-wide projects and initiatives were started:

• Travel policy intended to achieve better control, follow-ups and cost savings, as well as increase safety and environmental awareness. The policy was implemented in Sweden, the UK and the US during the year
• Introduction of a videoconferencing system in 28 locations around the world in order to reduce travel and environmental impact
• Training activities on CISG (United Nations Convention on Contracts for the International Sale of Goods) for global purchasers within Munters.

Quality and the environment

The division's quality and environmental manager is responsible for ensuring that production, product and service improvements take place based on the Group's environmental and quality policy.

The environmental policy contains the following general guidelines:

• Prevailing legislation in the environmental area must be complied with and preferably exceeded
• Environmental benefits of Munters' products and services should be marketed
• Employees must be involved and trained in environmental issues
• Increased control of waste volumes
• Increased recovery of material during damage restoration
• Environmentally oriented work processes.

The quality policy contains the following principles:

• Employees must be aware of and understand the importance of quality
• Organization and delegation of responsibility and authority relating to quality work must be documented
• Customer focus, cost efficiency and the requirements of ISO 9001/2000 or the equivalent must be the starting point for production
• Research and development of products, systems and service must be based on customer requirements and demand
• Routines, processes and methods that ensure the desired quality must be documented and followed
• Only suppliers that are able to satisfy Munters' quality requirements may be employed
• Marketing and sales activities may only create customer expectations that we can satisfy
• Development of quality work must be followed up continuously through information, feedback and quality reviews
• Quality-related work must be managed to achieve annual goals for quality improvements.

Munters has 20 production plants around the world and conducts operations subject to permit and reporting obligations at 13 plants. Within production, efforts have been made in certain local production plants to reduce production waste, as well as to use resources more efficiently. In producing new products, Munters' goal is to reduce the impact on the environment. Munters' product development, primarily of consumer products, is adapted to the EU's RoHS (Restricted or Hazardous Substances) directive, which today is also self-evident within Munters in product development for the industrial market.

When traditional air conditioning is used to cool an area, the humidity increases. This often results in growth of mold that is hazardous to health and moisture problems. In warm climates, there is therefore a demand for air conditioning in combination with dehumidification. However, traditional air conditioning is very energy-demanding. Several of Munters' products for climate control are based on evaporative cooling. Evaporative cooling means cooling through evaporation. Water added to warm air becomes vapor and thus lowers the air temperature. This is the same principle that the human body uses when it produces sweat. Four grams of water added to one cubic meter of air lowers the air temperature by 10° C. This is a natural cooling method that does not require energy. It sounds simple, but it requires great expertise to achieve commercial solutions.

Munters' operations in Sweden

Munters conducts operations subject to permit and reporting obligations that include emissions to air and water according to permit type B in the Environmental Code at its plant in Tobo. The permit covers all production operations in the plant and is valid until further notice. There are also noise restrictions. There are no injunctions within these areas. The production operations are environmentally certified according to ISO 14000. The products are continuously adapted to the EU's various environmental directives. Chemicals and other hazardous waste are collected and turned in for destruction. There are no environmental debts and no current disputes.

Operations outside Sweden

Of the Group's operations outside Sweden, 12 plants conduct some form of operations subject to permit and reporting obligations. Detailed information about these plants is available at www.munters.com/sustainability. There are no environmental debts and no current disputes.

Entrepreneurial spirit with customer focus

Munters is a global company with a strong local presence. Its culture is characterized by customer focus, professional expertise and dynamism. Delegated leadership results in a strong entrepreneurial spirit and an innovative work environment that creates prerequisites for continuously enhancing Munters' competitiveness and creating profitable growth.

Long-term organic growth supplemented by strategic acquisitions have created a global company with a strong company culture and local presence. This presence means that Munters can always offer local solutions based on the customer's own requirements, which provides a strong competitive advantage.

Personnel development

Munters' open company culture gives every employee clear responsibility for his or her own development. It provides a creative and living work environment in which everyone's unique abilities are fully utilized and creates personal motivation to develop. This is possible through delegated leadership. The clear responsibility for own development, which rests with each employee, combined with extensive support for all managers in their daily personnel work, has created an innovative work environment. An important tool for managers and supervisors in this work is Munters Management Manual, a place on the intranet where the company's guidelines, policies and recommendations are gathered.

Career opportunities

Munters is a youthful company that is constantly growing, which gives employees many opportunities to quickly expand their work assignments and develop in their professional roles. Within the Group, both managers and employees receive full support in pursuing a career within their own organization. Munters strives to recruit internally in the first instance when the company expands and new positions are created.

With constantly new technical applications and customer niches, work to recruit and retain key persons has become an increasingly important strategic goal. To guarantee and strengthen Munters' level of expertise over the long term, emphasis has been placed on creating awareness of future requirements on expertise and personnel.

Competence supply with respect to managers and key positions was further enhanced during 2008. The working model for succession planning, Munters Continuity Planning, offers good guidance in the work to match the company's requirements with employee desires for professional careers and personal development. Group-wide guidelines for mobility between countries have been established to improve

Age distribution

Average number of employees

Personnel turnover

0 800 1,600 2,400 3,200 4,000 4,800

03 04 05 06 07 08

Permanent and temporary employees

Personnel

the support for subsidiaries and employees who move to a new country to contribute to Munters' continued development.

Global perspective

Ensuring competence globally is important for the future. Munters therefore regularly arranges international meetings for managers and key persons to share new ideas that can contribute to better business, to learn from each other and to strengthen competitiveness in the local markets.

Munters conducts regular opinion surveys among all employees to quality-assure the work environment. The results are reported internally and provide the basis for development within each business area.

In pace with Munters' growth in new markets and new customer segments, additional requirements are placed on global personnel processes. The newly established management group for global HR issues implemented several global processes during the year to support Munters' business strategy. A new leadership development concept that supports Munters' strategic development was established in which competence development is matched to seniority and role in the company. Focus areas in the leadership development concept have been international company management with a special focus on China and strategy and management of support processes, such as research and development, finance and HR.

Training is primarily conducted in consortium form in collaboration with universities and other multinational companies. In addition, a Group-wide initiative was established relating to structure and processes surrounding management compensation, bonus programs and international mobility.

Incentives with clear goals

Within Munters, there is a strong link between individual performance and the company's earnings growth. The company has different programs for variable compensation that include standardized reward systems for sales and service personnel and bonus programs for senior managers and other key persons in the Group. These programs take into consideration sales and earnings trends, capital turnover rate and individual goals.

Employees in figures

The average number of employees, including temporary employees, was 4,291 during the year, an increase of 0.5 percent, compared with the preceding year. The proportion

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Group-wide model for project management

Each year, Munters conducts a large number of projects at the local, regional and global level. To become more focused and improve work in project execution, a Groupwide model for management and execution of projects – Munters Project Model (MPM) – was introduced in 2008. The model is designed to enable it to be used in all types of projects, even in R&D, and includes the project organization, a management model, documentation, a model for execution and documentation for follow-ups.

During the year, Munters conducted a global MPM training for a large number of employees in which management groups and Group management also received an overview of the model. During 2009, Munters will continue developing the model with the objective of making it a natural part of the Group's corporate culture.

of women amounted to 19 percent (19). Personnel turnover increased during the year to 17 percent (13) for the Group as a whole. The still relatively high figures are due to several factors. Personnel turnover as a result of relocation of production increased, compared with previous years. Europe has a high proportion of MCS employees, which is traditionally a personnel group with high mobility. Asia consist of several young companies with a large share of production where employee mobility is still relatively high. Munters is to a large extent a young company. Fully 52 percent of the workforce is younger than 40, and the average age is 40 years (38).

Dehumidification division

"The division's earnings in 2008 were satisfactory, given the turbulent market. The gross margin declined somewhat, however. This was a result of a changed product mix and non-recurring costs for a fault in a component supplied by a third party. The acquisition of Toussaint Nyssenne strengthens Munters position in the European market for customized air treatment systems for offices and public buildings. It also provides greater access in Europe to Munters' DryCool technology that has achieved great success in North America. Our goal is to continue strengthening and expanding our presence in Europe."

Mike McDonald, Division President

Developments during 2008

• Relatively stable order intake during the year, with a positive growth in business with new customers in the US in the Commercial segment
• Acquisition of Belgium-based Toussaint Nyssenne completed in the fourth quarter
• Division's presence in Asia strengthened
• First signs of a weaker market at the end of the fourth quarter.

The Dehumidification division showed stable growth during the year, despite signs of weaker market conditions toward the end of the fourth quarter. Demand for applications in the commercial segment was strong, due to new and more energy-efficient products launched as a result of the acquisition of Des Champs Technologies a year earlier. The market for dehumidifiers for industrial applications was also sound during the year and driven by strong demand from the pharmaceutical and food industries. Margins were negatively affected by guarantee costs due to faulty components from a third party. The order backlog at the end of the year was favorable, but the mix of gross margins was somewhat weaker, compared with last year. Measures to decrease personnel were taken during the latter part of the year in response to the weaker market conditions that are expected. The acquisition of Toussaint Nyssenne was completed during the fourth quarter, and the company was consolidated as of October 1, 2008.

KEY DATA 2008

	2008	2007	Change, %	Adjusted change, %1
Order intake, SEK M	2,133	2,001	7	5
Net sales, SEK M	2,051	1,936	6	3
Operating earnings (EBITA), SEK M	201	234	–14
Operating margin, %	9.8	12.1
Return on operating capital, %	38.7	52.0
Capital turnover rate, multiple	3.9	4.3
No. of employees, Dec 31	1,301	1,180	10

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Continued geographic expansion

The Dehumidification division is a world leader in energy-efficient products and complete solutions for controlling humidity and improving the quality of indoor climates. Its technology is used in both production equipment and in large premises such as warehouses, department stores and schools. Environmentally friendly products, advanced technical expertise and a global presence, in combination with a strong customer focus, have contributed to Munters' strong position. The US and Europe are the largest geographical markets, but Asia is growing in importance. Manufacturing takes place in plants in Sweden, Belgium, the US, Mexico, Brazil, Japan and China.

Services and offering

The Dehumidification division has an organization based on functions and is divided into three market areas: the Americas, Europe and Asia. The Americas region accounts for slightly more than half of sales, Europe accounts for slightly more than a third and the remainder is attributable to Asia, which includes Australia.

The division offers products and complete solutions to improve air quality for its customers, thus creating more efficient manufacturing processes or storage conditions or an improved indoor climate. Munters solutions are installed in widely varying buildings, including manufacturing plants, department stores, schools, restaurants and hospitals. A smaller portion of operations is focused on the semiconductor and composite industries with equipment for cleansing air from the solvents used in the production processes. Munters has a complete product program, with dehumidifiers and dehumidification systems for air flows from 50 m³ /h up to 150,000 m³ /h.

Proprietary core technology

The division's products and systems are based on the most energy-efficient technology and employ Munters' dehumidification rotor, which is designed to absorb humidity. The Dehumidification division's competitiveness consists of high technical expertise, global market coverage and an ability to adapt products and systems to customer-specific needs.

Munters' world-leading brand and its capacity for service and support are other competitive factors.

Climate control is a critical factor in many manufacturing processes. Small changes in humidity and temperature may create a breeding ground for mold and bacteria. This in turn may affect the safety and quality of manufactured products, as well as health and productivity in the workplace. In commercial premises, traditional air-conditioning systems are often used to control the indoor climate. However, these systems consume considerable energy. Munters' solution, which is based on reducing humidity levels in the premises, requires less cooling and thus lowers energy consumption.

A majority of the world's population lives in climates with high temperature and humidity, and it is in these areas that needs are greatest. Awareness of the economic prerequisites

for addressing these problems is increasing in many regions. Thus far, the greatest sales successes for Munters' systems have been achieved in the US, where large parts of the country have a warm climate with high humidity.

Increased environmental awareness

Increased environmental awareness among the public and the authorities in combination with a trend towards high energy prices is driving development of more energy-conserving products. Munters offers the market's most energy-efficient products, and on the strength of its technical leadership, the company strives to improve environmental features of all of its products. Product development is focused on improving the dehumidification rotor's performance with unchanged or reduced energy consumption. One example of an energy-saving innovation is Power Purge™, through which the energy consumption in a dehumidification system can be reduced by up to 40 percent.

Customers and market

The global market for Munters' dehumidification products and systems is estimated to amount to about SEK 15 billion. Munters total market share amounts to about 15 percent within its defined markets. Within rotor-based dehumidification, Munters holds a 50-percent market share.

The food and pharmaceutical industries are the largest customer segments. Moisture results in substantial negative effects on food and pharmaceutical quality in production, handling and storage. Global food producers strive for identical taste, aroma and appearance of their products, regardless of the climate zone in which they are produced. Cold and frozen products also present a more difficult challenge. Munters' dehumidification systems offer customers the ability to control humidity and thus prevent the formation of frost and ice during the production process. In the electronics and semiconductor industry, a humidity-controlled environment is often crucial for the manufacturing result. One example of a significant customer application is bridge constructions in which dry air protects sensitive parts against corrosion.

Customers within these customer segments include such global companies as Texas Instruments, General Electric, Siemens, Pfizer and Nestlé.

How Sandvik reduced energy costs and increased production

The Swedish engineering group Sandvik has a worldleading position in selected niches. One of them is tools and components in cemented-carbide and high-speed steel for metalworking. During 2008, Sandvik opened its new plant in Rovereto in northern Italy. About 130 persons work in the plant in three shifts manufacturing shank-end mills in solid cemented-carbide.

Energy efficiency high on requirements list

The climate in this region is characterized by short, cold winters and long, hot summers with high humidity. Because Sandvik uses advanced CNC machines that are sensitive to climate changes, it was important to find the market's most optimal air treatment system. Among Sandvik's many stringent requirements on such a system, energy efficiency was very high on the list. The company had positive experience of Munters' air treatment systems from other Sandvik plants around the world. Sandvik contacted Munters' experts who presented a solution with the new DryCool ERV system that was launched so successfully in the US market just a few months earlier.

Controls both temperature and humidity

What makes the DryCool ERV system special is that it controls both temperature and humidity in the same system. It also uses heat recovery and condenser heat to dry the dehumidifier's rotor. The result is the market's most energyefficient and effective climate control system. During the summer months, the system provides dehumidification and cooling. In the winter, energy is saved by recovering waste heat. A perfect production climate is created, regardless of the season.

Reduced energy costs and increased comfort After installation of DryCool in the Rovereto plant, Sandvik reduced its cooling requirements by a full 60 percent during the summer months. In addition, DryCool contributed to increasing production in the plant. When the climate surrounding a CNC machine is optimal, the need for manual supervision is reduced. By installing DryCool, the machines can run on weekends with reduced personnel. This was not possible previously due to the high cost of human supervision. The most important benefit that Sandvik discovered was that the plant's many employees can now work in a comfortable indoor climate regardless of the season.

Global partners

In addition to increased focus on energy-efficient solutions, major customers within the food and pharmaceutical industries are increasingly seeking global partners to guarantee product standards and achieve efficiency in purchasing. Munters is one of the few global companies in the industry, with manufacturing, sales and service operations in North and South America, Europe and Asia in an otherwise fragmented market. Competitors primarily consist of regional players that are active in their local markets or in specific niches. Munters' market share amounts to about 14 percent of an estimated total market for customers in the industrial segment of slightly more than SEK 9 billion.

The Dehumidification division is also specialized in humidity and temperature control in commercial premises frequented by many persons, such as department stores, schools, restaurants and hospitals. These customer segments account for one third of the division's sales. In department stores, for example, Munters' systems create a comfortable indoor climate for customers and personnel, while the dry air prevents ice formation in the freezer cabinets for frozen food. A customer group showing strong growth is schools, where high humidity often gives rise to mold, which can result in students being affected by allergies. Operating rooms, swimming pools and ice rinks are other examples of demanding applications with substantial requirements with respect to humidity and climate control. The acquisition of Des Champs Technologies in 2007 strengthened Munters' position as a leading supplier of energyefficient systems for climate control for commercial buildings and enabled market coverage to be improved strongly with respect to both climate zones and customer applications.

Energy-efficient solutions

The largest players in indoor climate control for commercial buildings are traditional air-conditioning companies, such as Trane and Carrier. These air-conditioning systems are primarily intended for cooling intake air and are less suitable for regulating the humidity level. This means that the indoor climate becomes humid, with the resulting risk for mold and bacteria growth. The traditional solutions available for controlling humidity in these premises require significantly more energy than Munters' solutions. Munters is a small player in the market for commercial air conditioning. However, through a niche strategy that focuses on technical leadership and energy-efficient products for treatment of ventilation air, a strong market position has been achieved. Today, Munters is the leader in products that control both temperature and humidity. Munters' market share in these commercial segments amounts to about 14 percent of an estimated total market of SEK 5 billion.

Cleaning emissions

A smaller portion of the division's operations, approximately 3 percent of sales, manufactures what are called Zeol systems that remove solvents from emissions in conjunction with production processes. This is a small but very profitable niche market. The largest customer segment is the semiconductor industry, but auto paint shops are growing in importance. The largest individual customer is Intel. Both the semiconductor and the automotive segments are cyclical with respect to investments, which affects Munters earnings trend. Munters market share in this niche amounts to about 12 percent.

Customer-oriented product development

Much of the division's development work is focused on further development of the product platforms that serve as the foundation of the Munters dehumidifier range. With these modular platforms as a base, cost-efficient products are developed that create economies of scale and permit customization according to the very varied requirements of the customer segments. One example is the Integrated Custom Airhandler (ICA), which is a platform consisting of large industrial systems that accounts for one third of sales to industrial customers in the US market.

One example of products for the commercial customer segment is DesiCool, which is an environmentally friendly and energy-efficient air treatment system that recovers waste heat and converts heat to cooling in office premises and production facilities. The DryCool product family, which was further enhanced in conjunction with the acquisition of Des Champs, has proven to be very attractive in the segment for public and commercial premises. Both DesiCool™ and DryCool will be manufactured in the newly acquired Toussaint Nyssenne in Belgium and thus become more available for a broad European market.

Munters supplies dehumidification equipment to NASA

At Cape Canaveral Air Force Station in Florida in the US, a plant for assembly of tomorrow's satellites is now under construction. High demands are being placed on all equipment to be used in the plant, particularly considering the high humidity that prevails in this coastal area of Florida. In intense competition, Munters won an order to deliver ten large customized dehumidification units to NASA. Each unit contains specially manufactured peripheral equipment which had undergone rigorous quality controls. The units were delivered as planned in the autumn of 2008.

Developments during 2008

The first products to combine Munters and Des Champs technologies were launched during the year.

The acquisition of the Belgian company Toussaint Nyssenne, a manufacturer of high-quality air treatment systems, was completed during the fourth quarter. The acquisition strengthens Munters' market position within the European market for customized air treatment systems for offices and public buildings. The greatest potential lies in creating greater availability in Europe for Munters' Drycool technology, which is very successful in North America. The acquisition will also facilitate more rapid growth through synergies in product integration, technology and distribution. Toussaint Nyssenne's products complement and also expand Munters' product range in industrial applications. The acquisition contributed 122 employees and annual sales of about SEK 193 million.

Non-recurring costs of SEK 13 million for quality problems due to a sub-supplier were charged against earnings in the second quarter. Stronger presence in China provides the foundation for growth during 2009.

Strategy

• Global product platforms to achieve cost savings
• Expansion in Asia
• Strengthened presence in the European market for commercial products
• Increase energy efficiency of products
• Increase focus on energy-efficient industrial air treatment with DryCool and DesiCool
• Improve margins through global purchasing and relocation of production, as well as global adaptation of the product range
• Acquisitions that leverage Munters' leadership in energy efficiency and dehumidification.

Focus 2009

During the preceding year, much effort was devoted to implementing efficiency-enhancing measures within the framework of the Munters Efficiency Program. In addition, considerable focus was devoted within the division to streamlining the product portfolio to comprise a smaller number of global product families that are designed according to a modular philosophy. Furthermore, development continues to combine Munters and Des Champs technologies in new products. A similar technical and organizational development has been initiated with the newly acquired Toussaint Nyssenne. The division intends to continue its expansion within commercial products, including DryCool and DesiCool, in the European market.

During 2009, the division will continue to selectively strengthen its presence in the Asian market and in addition ensure that production in the new Chinese plant develops according to plan. A broad product portfolio is manufactured in China, and the plant constitutes a production center for Asia, while being developed into a global center for purchasing of low-cost components.

Better air when school starts

Most children probably dream at times of escaping school. Perhaps it snows so much that school will be cancelled and students can sleep in late. Or perhaps the air conditioning breaks down on a hot summer day and school ends early. At Jefferson Forest High School in Forest, Virginia in the US, however, the problems were much greater. Severe mold growth and poor indoor air quality forced officials to close the school and start the summer vacation three weeks early.

What was a dream come true for many students proved to be a formidable challenge for school officials. In a short period of time, they had to get the building in shape for the autumn semester. The problems with poor air had existed for some time, and both students and employees had complained about breathing difficulties, headaches and allergy-related symptoms. When the roof needed to be replaced, several leaks were discovered that had resulted in mold and bacteria growth. The real villain, however, was poor air circulation, which was particularly evident when the children were in the school. Humidity levels of 70 to 90 percent could be measured, while the level should not exceed 60 percent to prevent mold formation.

Energy-efficient heat exchanger

IMEC Engineers, which was employed for the sanitation project, was able to conclude that the existing air-conditioning system was only cooling the air but could not remove the humidity. "We needed a supplier who could solve the humidity problem as quickly as possible," says J. Todd Owen from IMEC.

He contacted Munters, which installed three permanent Wringer aggregates. These units contain Des Champs' unique and energy-efficient heat exchangers and can be adapted to any climate. The moist outdoor air is cooled and dehumidified before being led into the building again. "After the installation, several measurements have been performed, and we are very pleased with the results. The problem is solved, and we also finished in time for the start of school," comments J. Todd Owen.

HumiCool division

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"After a strong first half of the year for most business areas, HumiCool was affected by a sharply weakened market as a direct result of turmoil in the credit markets that quickly resulted in reduced volumes. During the second half of 2008, the division implemented forceful measures to adapt the cost structure to the lower market activity. This work will continue during 2009. Our market position remains favorable, and I expect that the implemented measures will further strengthen the division so that we will achieve a rapid recovery when the market rebounds."

Per Segerström, Division President

Developments during 2008

• Favorable sales for most business areas during the first half of the year with the exception of HVAC
• Sharply weakened market prospects after the summer
• Rationalization measures in the production structure and substaintial reduction of the workforce.

During the first half of the year, market growth was strong for all business areas except HVAC, which experienced weak demand for mobile heaters after a mild winter. Mist Elimination showed a favorable earnings trend aided by a solid order backlog, but order intake declined significantly due to low demand among coal-fired power plants in the US. After the summer, all business areas were strongly affected by the turmoil in the global credit markets, which resulted in distributors experiencing difficulty with short-term financing and thus reducing inventories. A dramatic decline in the

AgHort market became evident in the fourth quarter, with the US leading the downturn. The driving force over the short term was a lack of financing, but a rapid increase in the price of animal feed that has not been reflected in the price of meat means that the industry over the medium term will experience strong pressures on margins that will limit willingness to invest. Earnings during the year were affected by a non-recurring cost of SEK 10 M resulting from bankruptcy of a large US HVAC customer, which was unable to renew its loans due to the financial crisis. To adapt to the lower market activity in several segments, adjustment of the workforce continued and will be combined with additional changes in the production structure. During the year, the MEP2 program was implemented with the objective of adapting HumiCool's production units to the demands and requirements that will be placed on the division in the future. A non-recurring cost of SEK 22 M was charged against earnings during the year and was mainly attributable to the units in Mexico and German and the relocation of production from Italy and Sweden to China and Mexico. 0 500 1,000 1,500 0 100 150 500 1,000 1,500 2,000 2,500 3,000 200 300 SEK M SEK M 2003 2004 2005 2006 2007 2008

KEY DATA 2008

	2008	2007	Change, %	Adjusted change, %1
Order intake, SEK M	1,644	1,837	–11	–14
Net sales, SEK M	1,743	1,765	–1	–5
Operating earnings (EBITA), SEK M	155	251	–38
Operating margin, %	8.9	14.2
Return on operating capital, %	27.5	52.3
Capital turnover rate, multiple	3.1	3.7
No. of employees, Dec 31	866	924	–6

2003 2004 2005 2006 2007 2008

Preceding year translated to this year's exchange rates and adjusted for acquisitions.

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HumiCool offers environmentally friendly and energy-efficient solutions for creating an optimal indoor climate for animals, plants and humans, as well as for industrial processes. The technology is primarily based on evaporative cooling that occurs when water evaporates. This is nature's own method for cooling the surrounding air. In addition, the division offers effective products for reducing harmful emissions, primarily for the coal-fired power industry. Munters has a strong position through its role as a pioneer in evaporative cooling. An increasingly broad product portfolio, considerable application expertise and global presence are some of HumiCool's competitive advantages.

Services and offering

The division is divided into three business areas, AgHort (Agriculture & Horticulture), Mist Elimination, HVAC/ GTEC (Heating, Ventilation and Air Conditioning and Gas Turbine Evaporative Cooling). AgHort, which is the largest business area, offers systems for climate control primarily for facilities for livestock breeding and for cultivation of plants and vegetables. Mist Elimination manufactures components called mist eliminators primarily for flue-gas cleaning systems for coal-fired power plants, as well as for the process industry and maritime applications. The HVAC/GTEC business area offers products for climate control for indoor environments and products for air cooling for gas turbines. The division has major production facilities in the US, Mexico, Germany, Italy, China and Australia and smaller production and logistics units in Brazil, Denmark, South Africa, Thailand and Japan.

Proprietary cooling technology

Munters' technologies in the AgHort, HVAC and GTEC business areas are based on evaporative cooling. Warm and dry air passes through Munters' special CELdek® or GLASdek® cooling pads, which are sprayed with water. As the air passes over the pads, the water evaporates, making the air cool and moist. This cooling technology, which is based on Munters' own innovations, offers low operating costs and is also very environmentally friendly. Within this business area, Munters also offers a broad range of mobile heaters, which are used when there is a need to heat small or large areas during a short period of the year. Within Mist Elimination, the technology is based on removal of liquid droplets from gas streams by mist eliminators. In the Flue-Gas Desulfurization (FGD) application, the flue gas is sprayed with a liquid containing substances that bind compounds (sulfur) in the gas. Thereafter, Munters' mist eliminators remove the liquid droplets in which the compounds have been absorbed.

Customers and market

The total market that HumiCool can address with the current product portfolio has an estimated annual volume of about SEK 18 billion. Munters'market share is about 10 percent, but in the product areas cooling pads and fans for livestock enclosures and flue-gas cleaning, the market share is significantly higher.

The AgHort business area accounts for about 44 percent of sales within HumiCool. The defined global market is estimated at about SEK 6.5 billion. The business area is the world leader in energy-efficient climate control for buildings primarily intended for poultry and livestock breeding. Munters supplies its systems both to distributors, manufacturers of enclosures for livestock breeding and horticulture and directly to breeders and farmers.

Some components are also sold to other system integrators. Together, this customer segment dominates sales. In warm climates, cooling of indoor air is required in livestock breeding to achieve satisfactory productivity. For customers in the AgHort sector, cost efficiency and productivity are decisive factors.

Cost-effective cooling

Munters' evaporative systems provide the most cost-effective cooling, compared with other technologies. Demand is primarily driven by consumption trends for chicken and pork, but technical development within livestock breeding is toward increasingly advanced and more large-scale production. Another important segment in AgHort are systems for greenhouses, where the countries in southern Europe are the most important markets.

The largest markets are the US, Eastern Europe, the Middle East and Italy. Major customers include such companies as Dutchman in Europe and Hog Slat in the US. Competitors are mainly local players with relatively small-scale production, although there are also larger players, such as GSI and CTB in the US.

At Thorupgaard, breeding pigs is high tech

Each year, more than 25 million pigs are raised in Denmark, making the country one of the world's largest producers and exporters of pork. More than 85 percent of pork products are exported, corresponding to slightly more than 5 percent of Denmark's total exports. Breeding of pigs takes place both on a large scale and in smaller family-owned farms. One of Denmark's more than 7,800 pig farms is Thorupgaard, which is owned by Espen Dollerup and located in northern Jylland, where the climate is characterized by both mild winters and summers.

Specialized industry

Modern pig breeding is now a highly specialized industry. Insemination and delivery of piglets often takes place separately from the raising of piglets. Thorupgaard specializes in breeder pigs, meaning that piglets are transported to other farms where they are raised. The facility consists of three connected buildings. The sows are moved from one building to another as the gestation period progresses. During the entire process, it is of the greatest importance that the climate is optimal during each phase so that the sows will produce as many piglets as possible. The climate is also very important after gestation. Although newly born

piglets are very well-developed behaviorally, they are very immature on the other hand in terms of immune defenses and temperature.

Optimal indoor climate

Espen Dollerup contacted Munters, whose experts surveyed all parts of the facility. One of the challenges in this special case was to be able to control the air flow over a limited surface, thus preventing drafts on the sows and newly born piglets. Furthermore, the climate system should prevent the warm and humid air that is generated from the pigs from remaining in the facility, since it could provide a breeding ground for infections and mold formation. A third challenge were the stringent requirements on ventilation to efficiently remove carbon dioxide, ammonia and foul-smelling substances from the air evacuated from the buildings.

By taking advantage of the HumiCool division's broad product range, Munters was able to use a range of installations in creating a unique and optimal indoor climate for each of Thorupgaard's three different buildings, all with unique requirements specifications. Today, Espen Dollerup can monitor the indoor climate in every part of the farm on a central computer, while also being able to make adjustments without needing to walk around the facility every day.

Mist Elimination accounted for about 28 percent of Humi-Cool's sales in 2008. The defined global market is estimated at about SEK 2.5 billion. The Mist Elimination business area is the global market leader in energy-efficient mechanical gas cleaning and separation of gas and liquids. The dominant customer segment consists of system suppliers for cleaning systems for coal-fired power plants, where Munters' mist eliminators are used in the cleaning process for emissions. Within the power industry, rising prices for natural gas and oil over the long term will probably result in increased demand for energy from coal-fired power plants.

More stringent environmental requirements

The increasingly stringent environmental requirements in China mean that the fast-growing coal-based power industry needs effective solutions for reducing hazardous emissions. Demand is also expected to increase in the US over time as a result of more stringent environmental requirements and a desire to reduce dependence on imported oil. The political uncertainty and the introduction of new laws relating to emission rights, however, have temporarily stopped construction of new FGD plants. The most important customers are system suppliers for coal-fired power plants. Another significant customer segment is the process industry. Competitors include Koch, Peerless and RPT.

Correct humidity solved packaging problems for Absolut Vodka

The V&S Group, which during the summer of 2008 was purchased by the French spirits giant Pernod Ricard, is one of the leading manufacturers and distributors of liquor in northern Europe. The acquisition of the previously stateowned V&S meant that Pernod Ricard took over the role as the world's largest alcoholic beverages company ahead of the UK's Diageo. As a subsidiary to Pernod Ricard, V&S has a large number of brands and sales in some 125 markets. The Absolut Vodka brand is ranked as the world's fourth largest liquor brand in the premium segment.

Problems in the packaging hall

One of the Swedish production plants is in Åhus in southern Sweden. During the winter, V&S had major problems

with the packaging process due to the relative humidity in the packaging hall. The dry air resulted in changes in the shape of the cartons to be used in the boxes. The packaging machine is very sensitive to changes in form, which resulted in excessive carton waste.

Munters' evaporative humidifier solved the problem Munters' experts installed an evaporative humidifier with continuous regulation in the ventilation system. The installed humidifier is very energy-efficient and therefore has low operating costs. From the previously level of 15 to 20 percent, humidity has now been increased to 50 percent. This means that problems with deformed cartons and static electricity were eliminated, while carton waste has been minimized.

Cooling systems for all climates

The HVAC/GTEC business area accounts for 28 percent of the division's sales. The total defined global market for the business area is estimated at about SEK 9 billion. Within the HVAC segment, sales consist mainly of components to manufacturers of evaporative cooling systems for homes, commercial and industrial premises in warm and dry climates, such as Australia and the southwestern US. Mobile heaters are primarily sold in the European market. A small but growing application are systems for pre-cooling air-cooled condensers. HumiCool is the market leader, and competitors are often local or specialized manufacturers. The most important customers for heaters are distributors such as Vneshtechkontrakt in Russia, Clarke International in the UK and Kroll GmbH in Germany. Competitors include BM2 and DESA.

Component customers include Climate Technologies in Australia and Coiltech in Sweden for industrial pre-cooling. The GTEX application offers a cooling system for the intake air to gas turbines, which increases the efficiency of the turbine and produces more energy per cubic meter of gas. Although traditional technology still dominates the market, demand for the Munters cooling system is expected to gradually increase in pace with rising energy costs and increased use of gas as a source of energy. Customer are primarily suppliers of gas turbines, such as General Electric and Siemens. One example of a competitor is Mee Industries in the US.

Development during the year

The various business areas within HumiCool developed in different ways during the year. The GTEC application developed well during the year with favorable demand in both Europe and the US.

The largest business area, AgHort, showed favorable growth over the first three quarters, with the US as an exception, but some weakening was noted during the third quarter. During the fourth quarter, the effects of the financial crisis also reached the AgHort segment, resulting in a rapid decline in demand.

Within Mist Elimination, order intake remained low as a result of the uncertainty prevailing in the US with regard to construction of FGD systems. After more than six months of uncertainty surrounding the Clean Air Act, what is called the CAIR rule was declared invalid in late-summer by a federal court in the US. This rule regulated trading in emission rights. Because trading of emission rights was one method of financing investments, order intake declined dramatically. Sales of mobile heaters in the HVAC business area were negatively affected by the short and mild winter season in 2007/2008. Sharply weakened demand from end-customers, accelerated by turmoil in the credit markets, resulted in distributors of heaters refraining from building up inventory levels.

During the fourth quarter, production of GLASdek® in Tobo, Sweden closed as a result of consolidation of production to Mexico.

During the year, a major HVAC customer in the US declared bankruptcy, since it was unable to renew its loans due to the financial crisis. This resulted in non-recurring costs of SEK 10 M.

In China, the market developed according to expectations, and the division increased its presence with more products and larger production facilities to meet the expected increase in demand over the coming years. The expanded production capacity provides significant cost advantages not only in China, but also increases Munters' presence in the entire Asian market.

Strategy

• Strengthen position in the value chain by expanding the product portfolio, application know-how and logistics
• Develop energy-efficient products and systems based on core technologies and components
• Selective geographic expansion with an emphasis on Asia, South America and Eastern Europe
• Create long-term profitable growth through rationalization of the production structure and an increased share of production in low-cost countries.

Focus in 2009

In parallel with continued adjustment of the cost structure to market conditions, work will continue to develop the division's business areas. The development plan primarily includes organic growth, although new acquisitions will be sought that broaden the existing product offering within energy-efficient climate control. Munters is also focusing on increasing the share of solution-oriented offerings and expanding geographically.

In addition, Munters will continue the consolidation of global operations with the primary objective of creating a flexible and cost-effective logistics organization and production apparatus. In part, this will mean relocating additional production to China and Mexico to strengthen the market presence in Asia and North America, but also to reduce cost levels.

Moisture Control Services (MCS) division

"During 2009, major changes will take place in how we work within MCS. We will become even better at understanding the needs of our selected customer segments and more effective in how employees work in the field. The focus is on the gross margin, and we will leave markets in which we are not profitable to focus on growth in markets that have the best potential. We will continue work to gradually introduce professional key account management, improved processes and work methods for increased productivity and the introduction of a mobile IT system."

Morten Andreasen, Division President

Developments during 2008

• Continued favorable order intake and sales in most markets
• Underlying earnings on par with preceding year
• Non-recurring costs of SEK 100 M, of which SEK 55 M in MEP2
• Field.Link introduced in five countries during the fourth quarter
• Ongoing efficiency measures due to the launch of Field.Link.

The MCS division experienced favorable growth throughout the year. Strong earnings were noted, particularly in US operations, where the hurricane season and other weather-related events

resulted in good business volumes. In large parts of Europe, market shares continued to increase. Earnings were affected, however, by continued inflationary pressure in salaries and fuel, although some relief was noted toward the end of the year. The trend in which insurance companies increasingly sign framework agreements with the major restoration companies continued. The MCS division signed two framework agreements during the second half of the year with insurance companies in the US and Australia. In addition, the global partnership with AXA was expanded with a new contract in the UK. Investments within the framework of the MEP2 program amounted to SEK 55 M. Non-recurring costs were charged against earnings in an amount of SEK 45 M, primarily attributable to preparations for the phase out of certain operations, closure of operations in New Zealand and three depots in Australia and the merger of the French and Belgian business units. These costs also included preparations for the phasing out of certain operations. 500 1,000 1,500 2,000 2,500 3,000 100 150 200 250 300 SEK M SEK M

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KEY DATA 2008

	2008	2007	Change, %	Adjusted change, %1
Order intake, SEK M	2,770	2,630	5	5
Net sales, SEK M	2,809	2,624	7	7
Operating earnings (EBITA), SEK M	48	129	–63
Operating margin, %	1.7	4.9
Return on operating capital, %	5.5	15.5
Capital turnover rate, multiple	3.2	3.2
No. of employees, Dec 31	1,944	1,918	1
No. of service depots	301	321

Preceding year translated to this year's exchange rates and adjusted for acquisitions.

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World leader in property damage restoration after water and fire damage

The Moisture Control Services (MCS) division is the world leader in restoration after water and fire damage. MCS is enhancing its strong market position through a unique ability to partner with major players, such as insurance companies and large property managers. The division also offers temporary humidity and temperature control, primarily in the property and construction sectors.

Services and offering

The MCS division works with two main segments. The largest area of operations is restoration following water, humidity and fire damage, which accounts for 86 percent of sales. Leasing of equipment for temporary humidity and temperature control, in part for the construction industry, accounts for 11 percent of the division's sales. Other services that the division provides are leak detection and minor renovation services.

Operations are conducted from about 300 depots in 20 countries and are adapted to the prerequisites of each local market. Being able to take advantage of joint concepts, work methods and technical aids is an important success factor within MCS. Munters' competitive advantages include high availability, rapid response times and modern technology, which together ensure more rapid and cost-efficient restoration. Munters' methods for damage restoration – drying instead of demolition and rebuilding – also result in significant environmental gains.

MCS offers a total undertaking and often acts as project manager on behalf of the insurance companies, for example, by coordinating other sub-contractors employed at the site of damage. The technology and equipment employed is selected to meet high demands and includes high-capacity dehumidifiers, fans and heaters that are designed for effective logistics and sound ergonomics.

A smaller but significant and equally volatile part of the MCS division's business is restoration of water damage after hurricanes and floods. In the markets in which these weather phenomena are frequent occurrences, MCS has an organization that can respond quickly and which has extensive experience of handling such catastrophic situations.

Temporary climate control

MCS also offers services for temporary humidity and temperature control for the construction industry, for example. Effective drying of concrete and other construction materials reduces completion time and weather dependencies for construction projects. In addition, quality is secured and the risk of guarantee problems is reduced for the customer. MCS also offers climate control to prevent corrosion on cleaned steel

surfaces, such as those in shipyards. The petrochemical industry may also need temporary dehumidification in such applications as construction and maintenance work on pipelines and in cisterns. Companies working with painting and surface finishing are similarly dependent on humidity control to guarantee the finish and quality of coatings and lacquering.

Preventative damage control is an area that is increasing in importance for MCS. This includes such services as measuring heat leakage in buildings, thermographic detection of water leakage in water pipes and exterior roofs, inspection of electrical wiring to prevent the occurrence of fire and consulting assignments intended to increase energy efficiency in large buildings. Today such services account for a small part of Munters' sales, but the favorable trend in recent years motivates MCS to view this segment as a prioritized area.

Customers and markets

The global market for restoration after water and fire damage is estimated at about SEK 35 billion. The MCS division's market share within this segment is estimated at about 7 percent. The total market for temporary humidity and temperature control is estimated at slightly more than SEK 5 billion, of which MCS has a share of about 7 percent. Underlying growth is stable and is considered to be on par with GDP growth. However, demand can be influenced strongly from year to year by major assignments in conjunction with various types of natural catastrophes.

The division's customers are primarily insurance companies, but government authorities and private organizations are also important customer groups.

Fragmented industry

Both the insurance industry and the damage restoration industry have traditionally been very fragmented, and more than half of all assignments have been awarded to small, local players. Water and fire damage restoration is still in large part a local business. However, the consolidation taking place within the insurance industry has had the result that large insurance companies wish to simplify and increase the efficiency of the procurement process and handling of damage.

They require a comprehensive range of services that smaller local damage restoration companies can seldom offer.

This has had the result that an increasing proportion of business is based on national, and in some cases international, framework agreements that have been negotiated centrally and at fixed prices. The trend towards framework agreements has progressed the furthest in the UK and has been introduced in several markets in recent years. This trend favors Munters, since MCS is one of the few damage restoration companies working with a global organizational structure. With a well-developed system for key account management, Munters can take advantage of this trend. Munters estimates that framework agreements over time will account for about 45 percent of sales within MCS, compared with 40 percent during 2008. During the year, some ten new framework agreements were signed in Europe, the US and Australia.

MCS has a large part of its operations in Europe, where the Nordic market accounts for a significant portion of sales. Today the division has considerable growth potential in the US and above all the Asian market and is well-prepared to increase its presence in these regions. Munters' ambition is to grow in the US with a broader service offering. Expansion will take place primarily organically, but over time, selective acquisitions are possible.

Mobile IT for rapid and efficient damage restoration

Assignments within MCS are numerous, while the value of each assignment is usually relatively small. This creates opportunities for economies of scale and rationalization. The MCS division's ambition is to greatly simplify and improve daily communication both internally between damage technicians and administrators, but also externally with customers in insurance cases. In addition to reducing the time devoted to administration of various projects for such tasks as filling in forms, damage reports and action plans, more efficient work methods can reduce the number of visits to damage sites and create clearer documentation. As a result, a mobile IT system called Field.Link was launched in large parts of the organization during 2008. Experience from the UK market where the system has been in use for four years shows substantial potential for reducing costs while improving customer services, primarily through clearer online information flows and more rapid processing and service to key customers.

Another prioritized area within MCS is work with key account management. This means consolidating contacts with the leading insurance companies through systematic work processes and clear information flows that make it easier for both Munters and the customer to follow project progress.

Development during the year

Organic growth during 2008 continued to show a positive trend, and MCS won additional market shares. The aftermath of hurricane Ike resulted in the most extensive restoration effort in the US since hurricane Katrina in 2005.

Flooding in Iowa in the summer of 2008

After several days of heavy rain in June 2008, the situation was critical in the eastern and southeastern parts of the state of Iowa in the US. The many rivers that branch here and cover large parts of the state threatened to overflow. Just 15 years earlier, a large flood had caused tremendous damage, and when the flood dams on the Cedar River gave way on June 12, catastrophe was once again upon them. While Iowa City did not suffer as severely as was feared, the destruction in Cedar Rapids was very extensive. At one point, virtually the entire city center comprising more than 1,000 blocks was under water, and extensive property damage was reported. President George W. Bush arrived at the disaster area with Air Force One on June 20 to inspect the damage with his own eyes. In addition to evacuation of more than 20,000 Cedar Rapids residents by the authorities, flooding in the area was estimated to have caused damage for several billion dollars.

Munters' service technicians participated in the clean-up from the start and were responsible for 44 major restoration projects, including police stations, fire stations, libraries and other large public buildings over the entire disaster area. As is often the case in this type of disaster work, employees in some cases worked for weeks on end, and the strain on the entire organization was substantial. All assignments were completed in a commendable manner, and the Munters employees who took part in the work have every reason to feel proud of their efforts.

The division's strategy is to achieve strong growth in basic operations in the region and reduce the relative dependence on catastrophic damage. The gross margin declined during the year as a result of price pressures on several services.

During 2008, a new structure with clear delegation of responsibility was introduced in the organization whereby the number of regional managers was reduced from six to three at the same time as four function managers were appointed. In addition, a person was employed to develop operations globally for leasing equipment for temporary moisture and temperature control.

Efficiency was increased in the organization through a reduction by 12 depots during the fourth quarter and a merger of operations in France and Belgium. In addition, activity has been reduced in less profitable markets, with Australia as one example. MCS has decided to leave New

Zealand due to insufficient profitability and limited potential. The phasing out of some operations now in progress also negatively affected earnings.

Successful launch

The launch of Field.Link within the MEP² program was implemented in a successful manner, and the system was well received by our own personnel and important customer groups. This system is unique in the industry and gives MCS the ability to increase its field productivity and centralize administration, resulting in lower costs and higher quality. The system is currently used by about 1,000 field technicians, corresponding to about 80 percent of the user potential. During 2009, the system will be introduced in the remaining countries.

The other project within MEP² addressed accounts receivable. This is an area in which MCS has had problems for a

Munters leaves it cold

In an assignment in Bergschenhoek in the Netherlands, Munters recently had an opportunity to demonstrate the MCS division's broad expertise in difficult restoration projects. After a major fire in a distribution center, there was major smoke damage in an area that included a 5,000 m2 frozen storage area. The walls were covered with soot. Although cleaning such a large area would not normally have been a problem, cleaning had to take place under extremely cold conditions.

Successful restoration

Inside the freezer hall, the temperature had been maintained at a constant –24°C for the past 20 years, and it was extremely important that the temperature remained at the

right level. If Munters defrosted the cooling cells, it could result in serious structural damage to the cells. However, Munters' experts confirmed that an increase in temperature of five degrees to –19°C was sufficient to be able to successfully complete the cleaning without compromising the function of the cooling media. Before cleaning could begin, the Munters THC team conducted an extensive study of moisture levels on the freezer hall's floor. It was of the utmost importance that all moisture was eliminated, since hidden moisture in the floor could result in cracks in the floor when the temperature was lowered again after completion of cleaning. The entire restoration project was performed very successfully. Although Munters did not submit the lowest bid for the assignment, the customer was willing to pay a premium to ensure that the freezer hall could be taken into operation again at the specified time and with retained function.

long time. The new global credit policy is now much stricter, and all processes related to accounts receivable have been significantly improved. The review of all accounts receivable unfortunately resulted in the need to allocate substantial reserves, but the "clean-up" is now fully completed and work methods in this area have changed radically. This work will result in better utilization of operating capital and significantly reduce the risk of additional credit losses.

Strategy

Management has defined ten strategic initiatives that will be implemented in the entire organization during 2009.

Market

• Increased focus on four selected customer segments: insurance companies, property managers, public properties and industry with dedicated sales representatives who create deeper understanding or customer requirements
• Service mix the service range will be reviewed and improved based on relevance, profitability and proactiveness
• Critical mass each country must be able to show an established critical mass with respect to volume and returns. Otherwise measures such as mergers or divestments will be taken.

Operative initiatives

• All data systems within MCS will be integrated to facilitate information exchange, process control and decision making
• The number of depots will be reduced, and each country will instead have a central administrative and logistics function that will result in more efficient resource utilization of both equipment and personnel
• Development of systems for benchmarking of damage restoration processes, followed by the introduction of best practices in the entire organization
• Introduction of Field.Link in the remaining countries.

Financial initiative

• Increased focus on capital turnover rate has resulted in a strict credit policy being implemented in the entire organization.

Personnel initiatives

• A more flexible organization will be created with different forms of employment in which continued training and multiple skills will be prioritized
• Performance-oriented culture with structured goals, feedback and compensation planning for management positions.

Focus in 2009

During 2009, work will continue to improve the division's profitability and tied-up capital and to deliver results within the strategic initiatives. MCS intends to create a scalable business model based on successful and cost-efficient routines and to implement standardized work processes in the entire organization.

Folksam names Munters as main supplier

Karl-Eric Larsson is manager for the Construction Technology Claims department at the Folksam insurance company. He relates here what was the basis for selecting Munters as the business partner for inspection and handling of water and fire damage.

"At Folksam, we work constantly to improve our claims settlement process. When damage has occurred, we must be able to offer our policyholders fast high-quality handling of their claims.

"Just as Folksam, Munters places great emphasis on process improvement, and the investment in the mobile IT system that Munters is making supports the ideas and requirements that we have," says Karl-Eric Larsson.

Quick overview

"The benefits that Folksam sees with this technology are that orders can be placed easily, while Munters technicians in the field can give Folksam's claims adjusters a quick overview of the extent of the damage. Supported by this information, Folksam in turn can give policyholders more accurate information regarding the extent of the damage and the estimated time for repairs.

"The insurance sector is very competitive, and today, both we at Folksam and our business partners must be at the forefront even when it comes to technical developments. Against this background, it was a natural choice to select Munters as the main supplier for inspection and handling of water and fire damage," concludes Karl-Eric Larsson.

Furthermore, work will continue to increase the efficiency of logistics within damage restoration operations. The first step will be to introduce a single comprehensive customer service function in each country that will have an overall role in distribution of personnel and equipment to various assignments. This logistics structure is already in place in the UK, where experience has been very positive. As a result of this restructuring, the number of small depots will be reduced.

The division will also devote considerable effort to developing and strengthening work with key customers in the four prioritized customer segments. Work with key account sales is expected to result in continued increases in the proportion of framework agreements in total sales and to increased market share. During 2009, MCS also has as its goal to grow in the area of equipment leasing for temporary moisture and temperature control, particularly in the European market.

Risks and risk management

Risk management is an important process in the operational management of the Munters Group. In addition to analyzing the risks that Munters faces and evaluating them, it is important to reduce the significant risks through continuous preventive measures. This involves the type of risks that could cause serious disturbances in production, and thereby the Group's earnings ability, or jeopardize the Company's financial position.

Risk management

The Group's risks have been identified, valued and ranked based on how great an impact they would have on the Group's valuation and the risk that they will arise. Some risks are beyond Munters' direct control, while others can be controlled by the Group. Most of the risks are of a strategic nature, which emphasizes the importance of constantly working with a clear risk awareness. Work to formulate risk definitions and action plans is constantly in progress throughout the entire Group.

Operational risks

Munters is an entrepreneurial company with many small organizational units. The dependency on key persons is relatively great, and employee resignations may therefore be a threat. This applies particularly within MCS and product development within Dehumidification and HumiCool. A portion of Munters sales consists of components, products and equipment that are used in complex customer processes. Quality and contract obligations can result in warranty claims. Munters' expansion within MCS increases its exposure to the insurance industry. Changes in insurance products, new supplier relationships and financial problems in the insurance industry could pose a threat to Munters. Alternative technologies may constitute a risk. Companies currently active in air conditioning could establish operations in Munters' niches.

The Group's primary strength is its unique application and service expertise in humidity control in a global organization with a strong entrepreneurial spirit. Its weakness is a relatively diversified business that results in high costs. Strengths and weaknesses for Munters' three divisions are described below under each division.

Dehumidification division

Munters is a pioneer and the world's leading manufacturer of desiccant rotors, one of Munters core components, and has a broad product portfolio in dehumidification. The combination of cooling and dehumidification is considered to have substantial future potential.

A strong brand, long market presence, a global marketing organization with leading application expertise and an established service organization are other strengths.

High indirect costs for creating market growth, a somewhat unstructured product portfolio and many small organizational units are the division's weaknesses. Competition consists primarily of smaller local companies.

HumiCool division

Munters has high market shares in selected segments. The division is characterized by strong brands, technical leadership and broad application expertise. Weaknesses can be considered to be the many small organizational units and dependency on few OEM (Original Equipment Manufacturers) customers. The division is gradually transitioning from being a component supplier to a supplier of complete systems. Competitors are local companies with small-scale production.

Moisture Control Services (MCS) division

Competition comes from both international players, such as Belfor and ISS Damage Control, and small local contractors. MCS is the quality and technology leader with a strong brand and a complete service offering. Broad local presence in geographically diverse markets is a strength.

The division's weaknesses consist of volatile revenues and a relatively fixed cost structure, combined with low barriers to entry for competitors. Excessively high dependency on fixed contracts with the insurance industry may also constitute a risk.

Financial risk management

In its business operations, Munters is exposed to many different financial risks: market risk (primarily currency and interest risk), credit risk and liquidity risk. Munters' management and control of financial risks are regulated by a policy established by the Board of Directors.

The tables below show the proportions of foreign currencies in sales and operating costs and the sensitivity of earnings for currency fluctuations during 2008.

Currency	Proportion of sales, %	Proportion of costs, %
EUR	36.4	36.3
USD	31.0	29.6
NOK	7.2	7.3
GBP	5.1	5.0
SEK	5.1	8.6
Other currencies	15.2	13.2
Total	100.0	100.0

Estimated effect on operating earnings SEK +10% compared with SEK M % EUR –12.4 –4.0 USD –18.9 –6.1 NOK –1.8 –0.6 GBP –2.4 –0.8 AUD –0.8 –0.2 JPY –1.6 –0.5

For further information regarding financial risks, see Note 3.

Insurable risks

Sound risk management and understanding identify the areas in which insurance is effective. Insurance protection is regulated by central guidelines. Several insurance policies are managed at the Group level to enable coordination gains. This insurance comprises several different areas, such as general liability, product liability, property, interruptions, cargo, crime, Directors and Officers Liability and Employment Practice Liability.

Legal processes

Munters is involved in a small number of commercial disputes. None of these disputes is deemed to have any negative effect on the company's financial positions or earnings.

The most significant legal processes are attributable to Munters' subsidiary in the US. As of December 31, 2008, the company was named co-respondent in 52 (51) asbestosrelated cases. To date, none of the plaintiffs have claimed to have been exposed to any specific Munters product. In the past few years, Munters Corporation has won four cases through summary judgments, meaning that these cases are now closed. Munters Corporation is of the firm opinion that the remaining claims are unfounded, and it will strongly dispute every claim. Munters Corporation has protection for the asbestos-related claims by having taken out several insurance policies. Under the condition of certain reservations, the insurance companies have confirmed that, until further notice, they will pay a significant portion of the defense expenses.

For a period of time, a product within the Dehumidification division in the US suffered from a specific component fault. The reason for the fault was identified during 2008 and was attributable to a component supplied by a third party. Munters has initiated legal proceedings against the third party and is confident that it will be able to obtain compensation for a large part of the guarantee costs that arose due to the fault.

Munters does not believe that any of the claims mentioned above will have any significant negative impact on the Company's financial position or operating results.

The share and shareholders

The Munters share has been listed since October 21, 1997 on the NASDAQ OMX Nordic Exchange Stockholm. Market capitalization amounted to SEK 2.9 billion on December 31, 2008.

Share capital and number of shares

On December 31, 2008, Munters' share capital amounted to SEK 131,250 M distributed among 75,000,000 shares, each with a par value of SEK 1.75. The company has one class of stock. Each share carries one vote without restrictions at the Annual General Meeting. All shares carry equal rights to the company's assets and earnings. There are no restrictions on transfer of shares according to law or the company's Articles of Association.

In 2007, a 4:1 share split was implemented with automatic redemption of every fourth share and an increase in the share capital through a non-cash issue.

Ownership structure

As of year-end, Munters had 5,160 shareholders (5,101). The ten largest shareholders control 66 percent (60) of the voting rights. The proportion of shares owned by Swedish institutional investors corresponded to 46 percent (49), while foreign investors held 26 percent (25) of the capital.

Shareholders on December 31, 2008*

	No. of shares Capital, %		Votes, %
Investment AB Latour	10,950,000	14.6	14.8
Industrivärden AB	10,950,000	14.6	14.8
AFA Försäkring	5,622,637	7.5	7.6
Swedbank Robur funds	4,486,954	6.0	6.1
Nordea funds	4,403,139	5.9	6.0
Aviva Plc	3,761,305	5.0	5.1
State of New Jersey Pension Fund	3,600,000	4.8	4.9
Fourth AP fund	2,631,000	3.5	3.6
SHB/SPP funds	1,805,969	2.4	2.4
AMF Pension	1,400,000	1.9	1.9
Total, ten largest shareholders	49,611,004	66.1	67.0
Other owners	24,322,046	32.5	33.0
Outstanding shares	73,933,050	98.6	100.0
Treasury stock	1,066,950	1.4	–
Total	75,000,000	100.0	–

*SIS Ownership Data Corp

Distribution of shares on December 31, 2008

Shareholding	No. of owners	No. of shares	Owners, %
1–500	2,226	457,248	43.1
501–5,000	2,582	3,378,584	50.0
5,001–50,000	243	3,443,724	4.7
50,001–	109	67,720,444	2.1
Total	5,160	75,000,000	100.0

Trading volume

During 2008, 36.20 million Munters shares (35.72) were traded with a total value of SEK 2,058 M (3,314). The average share price during the year was SEK 56.05 (92.24). The highest price paid during the period was SEK 77.00 on February 4. The lowest price paid was SEK 27.60 on December 4. The beta value is a relative measure of the risk in the share measured as its correlation with the market index over the past 48 months. On December 31, 2007, the Munters share had a beta value of 0.63 (0.92), meaning that it had moved 63 percent (92) relative to the index. On December 30, 2008, the share price was SEK 38.40 (76.75), corresponding to a decline of 50 percent (27) during the year. During the same period, the OMX Stockholm index fell by 42 percent (6).

Dividend policy

The Board of Directors' intention is to apply a dividend policy according to which the dividend level is adjusted to Munters' earnings level, financial position and other factors that the Board of Directors considers relevant. The annual dividend shall correspond to approximately half of the Group's average net profit measured over a period of several years. The dividends over the years 2006 and 2007 and the proposed regular dividend for 2008 correspond to 43 percent of the average earnings for these three years.

Dividend

The dividends for the years 2006 and 2007 and the proposed regular dividend for 2008 correspond to 43 percent of the average earnings for these three years. For the 2008 fiscal year, the Board of Directors proposes that no dividend be paid.

Key figures per share¹

	2008	2007	2006	2005	2004
Earnings per share, SEK	2.21	4.49	4.40	3.39	2.74
Earnings per share after dilution, SEK	2.21	4.49	4.40	3.39	2.73
Average no. of outstanding shares, 000s		73,933 73,898 73,749 73,614 73,134
No. of outstanding shares on closing date, 000s		73,933 73,933 73,785 73,743 73,134
Treasury stock, 000s	1,067	1,067	1,215	1,257	1,866
Cash flow from operations per share, SEK	4.44	5.34	7.19	4.16	2.86
Operating cash flow per share, SEK	2.39	2.56	5.08	2.46	1.66
Equity per share, SEK4	17.28	16.16	20.33	19.42	15.65
Equity per share after dilution, SEK	17.28	16.16	20.33	19.45	15.63
Dividend per share, SEK	0.002	2.50	2.25	1.83	1.33
Share price on closing date, SEK	38.40		76.75 105.67	73.00	66.67
Market capitalization on closing date, SEK M3	2,880	5,756	7,925	5,475	5,000
P/E ratio, multiple	17.4	17.1	24.0	21.5	24.3
Return on equity, %4	13.8	25.7	22.5	19.3	17.8

Historical figures for the share were adjusted for the share split, redemption and non-cash issue implemented in 2007.

2 According to the Board of Directors' proposal.

³ The market capitalization is based on all shares, including treasury stock.

4 Effective January 1, 2006, Munters accounting is in accordance with the changes implemented in IAS 19, actuarial gains and losses are now recognized in equity. Key figures were recalculated according to those changes.

Trend in 2008

Per share data

Treasury shares

No repurchases or sales of treasury stock took place during the year. See also Note 19.

Incentives programs

Outstanding incentives programs are presented in Note 29.

Analysts who continually monitor Munters

The market analysts listed below monitor Munters continuously. It should be noted that the opinions and forecasts regarding Munters that they express are their own and thus not Munters' own or the opinions and forecasts of its management.

Company	Analyst	Telephone
Carnegie	Agnieszka Kaziow	+46 8 676 85 86
Danske Bank	Carl Gustafsson	+46 8 568 805 23
Enskilda Securities	Anders Eriksson	+46 8 522 296 39
Handelsbanken Capital Jon Hyltner		+46 8 701 12 75
Kaupthing Bank	Carl-Johan Blomqvist +46 8 791 48 55
Swedbank Capital Markets & Securities	Johan Dahl	+46 8 585 937 04

Trend since listing in 1997

Share OMX Stockholm_PI Total shares traded (000s) Carnegie Small Cap Index

Equity Liquidity

Turnover rate (right-hand scale)

Dividend per share

Corporate governance report

Munters AB (publ) applies the applicable rules contained in the Swedish Code of Corporate Governance ("the Code"). In accordance therewith, the Company has prepared this corporate governance report.

Division of responsibility

Responsibility for management and control of the Group is divided among the shareholders at the Annual General Meeting, the Board of Directors and its appointed committees and the President, in accordance with the Swedish Companies Act, other legislation and regulations, prevailing rules for exchangelisted companies, the Company's Articles of Association and the Board of Directors' internal control instruments.

Shareholders

On December 31, 2008, the Company had 5,160 shareholders. The proportion of the share capital owned by Swedish institutions amounted to 46.5 percent. Foreign investors owned about 25.5 percent of the share capital. The ten largest owners together had holdings corresponding to 66.1 percent of the share capital. For further information on ownership on December 31, 2008, see page 34 of the Annual Report.

Annual General Meeting 2008

The Annual General Meeting is the Group's highest governing body. The Annual General Meeting is normally held in April in Stockholm. The 2008 Annual General Meeting was held on April 22, 2008. Bengt Kjell was elected Chairman of the Meeting. The following decisions were taken:

• The Annual General Meeting adopted the Parent Company income statement and balance sheet, the consolidated income statement and balance sheet, decided to dispose of earnings in accordance with the proposed distribution of earnings resulting in a dividend of SEK 2.50 per share for the 2007 fiscal year, and discharged the Board of Directors and the President from liability
• The Annual General Meeting approved decisions in accordance with the Nominating Committee's proposal
• that the number of members of the Board of Directors elected by the Annual General Meeting shall be eight and that no deputy members shall be elected;
• that fees to the Board of Directors shall be paid in a total amount of SEK 2,275,000 of which (i) SEK 500,000 to the Chairman, (ii) SEK 250,000 to each of the Board members elected by the Annual General Meeting who is not an employee of the company, (iii) SEK 100,000 to the Chairman of the Audit Committee and SEK 50,000 to each of the other members and (iv) that SEK 50,000 to the Chairman of the Compensation Committee and SEK 25,000 to each of the other members;
• that fees shall be paid to the auditors on account;
• that the auditing firm Ernst & Young AB was to be elected as the Company's auditors for the period until the 2012 Annnual General Meeting. It was noted that Björn Fernström was to remain as auditor in charge until the 2009 Annual General Meeting, at which time he will resign as

auditor in charge in accordance with prevailing recommendations for a maximum assignment period of seven years;

• that Anders Ilstam, Bengt Kjell, Eva-Lotta Kraft, Sören Mellstig, Jan Svensson and Lars Engström were to be reelected, that Kenneth Eriksson and Kjell Åkesson were to be newly elected to the Board of Directors and that Anders Ilstam was to be Chairman of the Board. It was noted that the employee organizations had appointed Pia Nordquist and Kjell Wiberg as members with Tommy Morin and Ulf Wallén as deputy members of the Board of Directors.
• The Annual General Meeting approved a request from the Nominating Committee to adjust the Committee's instructions in accordance with its proposal
• The Annual General Meeting approved the Board of Directors' proposal to establish guidelines for compensation to senior executives
• The Annual General Meeting unanimously approved the Board of Directors' proposal to introduce an employee options program involving transfer of treasury shares
• The Board of Directors unanimously approved the Board of Directors' proposal to amend §3 of the Articles of Association entailing that the Board of Directors' registered office shall be in Stockholm Municipality.

Nominating Committee

In accordance with decision by the Annual General Meeting, the Nominating Committee is to be elected annually through the Chairman of the Board contacting the company's four largest shareholders, in terms of voting rights, based on the owner information in Euroclear Sweden AB's (formerly VPC AB) share register on the last banking day in August each year. Each of these owners is then entitled appoint a representative to, jointly with the Chairman, comprise the Nominating Committee for the period until a new Nominating Committee has been elected. If a member resigns from the Nominating Committee before completion of his/her duties, if applicable, a replacement shall be elected by the same shareholder who elected the resigning member or, if that shareholder is no longer one of the four largest shareholders, by the newest shareholder joining the group. If the ownership structure in the company changes before the Nominating Committee has completed its work, the Committee has the right to change its composition in the manner it deems appropriate. One of the owner representatives in the Nominating Committee shall be its Chairman.

The Nominating Committee's assignment is to prepare and present proposals for the election of the Chairman and other members of the Board of Directors, Chairman of the Annual General Meeting, fees and associated matters and, as appropriate, election of auditors. Information about the Nominating Committee's composition shall be published not less than six months prior to the Annual General Meeting. The members of the Nominating Committee may not receive fees, but any costs in conjunction with their work will be paid by the company after approval by the Nominating Committee.

Since October 2008, the Nominating Committee includes the following persons: Anders Mörck (Investment AB Latour), Carl-Olof By (Industrivärden), Anders Algotsson (AFA Försäkring), and Jan Andersson (Swedbank Robur Funds). In addition to the above list, Anders Ilstam, Chairman of the Board of Munters is also included. The Nominating Committee will prepare a proposal to the 2009 Annual General Meeting regarding the Chairman of the Annual General Meeting, composition of the Board of Directors and Board fees, as well as election of auditors and their fees. The Nominating Committee held three meetings during 2008. No compensation was paid to the Nominating Committee.

Work of the Board of Directors

General – According to the company's Articles of Association, the Board of Directors shall consist of four to eight members elected each year by the Annual General Meeting for the period until the end of the next Annual General Meeting. The Articles of Association permit the election of deputies, but no deputies were elected by the Annual General Meeting. By law, the employees appoint two members and two deputy members to the Board of Directors. In 2008, Pia Nordquist and Kjell Wiberg were appointed as employee representatives on the Board, with Tommy Morin and Ulf Wallén as deputies. The Group's CFO participates in Board meetings as does the Board's secretary, who is a lawyer and independent of the company. Other employees participate in Board meetings as presenters of special issues or when otherwise deemed appropriate. The members of the Board of Directors are presented on page 40 of the Annual Report. The Board of Directors establishes a written Working Procedure each year that regulates the Board's work and the internal distribution of responsibility, including its committees, decision procedures within the Board, the order of meetings and the Chairmen's duties. The Board of Directors has also issued instructions for the President and instructions for financial reporting to the Board. Furthermore, the Board of Directors has adopted a number of other policies, which are described below under the heading Policy documents.

The Board of Directors is responsible for the company's organization and the administration of its business and in so doing, must ensure that the organization is appropriate and dimensioned in such a manner that accounting, capital management and other financial matters are managed and monitored in a satisfactory manner. Furthermore, the Board of Directors is responsible for ensuring that the company has adequate internal controls and for continuously reviewing the internal control systems. The Board of Directors is also responsible for developing and following up the company's strategies in the form of plans and goals. The Board of Directors continuously monitors the work of the President and operative management. Among the members of the Board of Directors elected by the Annual General Meeting, there are persons with ties to the company's major owners – Industrivärden and Latour – and persons who are independent of these parties. In accordance with the rules of the Code and the listing requirements of the OMX Nordic Exchange Stockholm, seven of the Board members elected by the Annual General Meeting, excluding the President Lars Engström, are independent of the company. Of these, five are

independent of the company's major owners and meet all established requirements for experience.

Chairman – At the statutory meeting of the Board of Directors on April 22, 2008, Anders Ilstam was elected Chairman until the end of the next Annual General Meeting. The Chairman organizes and leads the Board of Directors work so that it is conducted in accordance with the Swedish Companies Act, other laws and regulations, prevailing rules for exchange-listed companies (including the Code) and the Board's internal control instruments. The Chairman follows business development through regular contact with the President and is responsible for ensuring that Board members receive sufficient information and supporting materials for decisions. The Chairman is responsible for ensuring that the Board of Directors continuously updates and increases its knowledge of the Company and in other respects receives the training required to be able to conduct Board work effectively. In addition, the Chairman ensures that an annual evaluation is conducted of the Board of Directors' work and that this information is provided to the Nominating Committee. The Chairman represents the Company in ownership matters.

Work procedures – According to the Work Procedures currently in effect, the Board of Directors shall meet not less than five times per year and for one statutory meeting per year. It shall also be convened at other times when the situation so demands. During 2008, the Board of Directors held five ordinary meetings, one statutory meeting and two by correspondence. Board work during the year was focused on strategic, financial and accounting issues. All decisions were taken unanimously. At each Board meeting, the President reports on the Group's development.

As evident in the table below, attendance at the year's meetings was highly favorable.

	Board	Audit	Compensation
Attendance in 2008	meetings	Committe	Committe
Lars Engström	8/8
Kenneth Eriksson1	6/6
Anders Ilstam2	8/8		1/1
Bengt Kjell3	8/8
Eva-Lotta Kraft3	8/8	4/4
Sören Mellstig4	7/8	2/2	1/1
Jan Svensson5	7/8	4/4
Kjell Åkesson	5/6
Sven Ohlsson6	2/3	1/2
Berthold Lindqvist6	2/3		1/1
Pia Nordquist	7/8
Ulf Wallén	8/8
Kjell Wiberg	8/8
Tommy Morin	3/3
Total number of meetings	8	4	1

Elected to the Board in April 2008.

2 Chairman of the Board and convener of the Compensation Committee.

3 Member of the Compensation Committee since April 2008.

Member of the Audit Committee since April 2008.

5 Chairman of the Audit Committee since April 2008.

6 Resigned from the Board in April 2008.

Audit Committee – At the statutory meeting of the Board of Directors on April 22, 2008, the Board decided to appoint Jan Svansson (Chairman), Eva-Lotta Kraft and Sören Mellstig as members of the Audit Committee for the period until the next statutory Board meeting. The Audit Committee is charged with preparing issues regarding the procurement of

auditing services and audit fees, following up the auditors' work and internal control systems, monitoring the current risk situation and the company's financial reporting and handling other issues assigned by the Board of Directors. The Audit Committee's work is regulated by special instructions adopted by the Board of Directors as part of its Work Procedures. During 2008, the Audit Committee held four meetings at which all members were in attendance. At three of these meetings, the Audit Committee met with and reviewed reports from the company's external auditors.

During 2008, the Board of Directors met with and received reports from the company's external auditors. The auditors' proposals for various improvements in routines and internal controls were accepted but did not result in any special measure from the Board.

Compensation Committee – At the statutory meeting of the Board of Directors on April 22, 2008, the Board decided to appoint Anders Ilstam (convener) and Bengt Kjell as members of the Compensation Committee for the period until the next statutory meeting. The Compensation Committee is charged with considering and preparing proposals regarding salaries, bonuses, pensions, severance pay, options and warrants for the President and other senior managers who report directly to the President and for such other similar issues assigned by the Board of Directors. On assignment from the Board, the Compensation Committee will present proposals on principles for compensation and other compensation terms for company management to be approved by the Annual General Meeting. The Compensation Committee's work is regulated by special instructions adopted by the Board of Directors as part of its Working Procedures. During 2008, the Compensation Committee held one meeting at which all members were in attendance and had regular contact within the Committee in conjunction with employment and other compensation issues.

Compensation – Fees to the members of the Board of Directors elected by the Annual General Meeting are decided by the Annual General Meeting based on the proposal by the Nominating Committee. For the period from the 2008 Annual General Meeting through the 2009 Annual General Meeting, the fee paid to the Chairman was SEK 500,000. Other members elected by the Annual General Meeting, who are not employees of the company, were paid fees of SEK 250,000. Furthermore, a fee of SEK 100,000 was paid to the Chairman of the Audit Committee and SEK 50,000 to each of the other members of the Audit Committee, and fees of SEK 50,000 to the convener of the Compensation Committee and SEK 25,000 to the other member were paid. No further compensation was paid to any Board member.

Reporting and control

The Board of Directors and the Audit Committee supervise the quality of financial reporting and the company's internal control systems and monitor the company's risk exposure. This takes place in part through instructions to the President and the establishment of requirements on the contents of the reports on financial circumstances that are regularly submitted to the Board of Directors, as well as through reviews with management and the auditors. The Board of Directors and the Audit Committee review and verify the quality of financial reporting, including the year-end report and the Annual report and have delegated responsibility to Company management to verify the contents of press releases containing financial information and presentation materials used in conjunction with meetings with the media, owners and financial institutions.

Company management

General – The President leads operations in accordance with the Swedish Companies Act and within the framework established by the Board of Directors. In consultation with the Chairman of the Board of Directors, the President prepares the information and supporting materials for decisions required for Board meetings, presents matters for consideration by the Board and motivates proposals for decision. The President leads Group management's work and takes decisions in consultation with others in management. Group management currently consists of six persons. Company management conducts regular business reviews under leadership of the President 12 times each year, often in conjunction with visits to various Group units. The President and other members of Group management are presented on page 84 of the Annual Report.

Compensation – At the 2008 Annual General Meeting, the Chairman of the Board of Directors informed the shareholders about the principles for compensation to senior executives. Proposed guidelines are presented on page 45, and the current compensation levels are presented in Note 28 of the Annual Report. The proposal for guidelines for the determination of salaries and other compensation paid to senior executives will be submitted to the 2008 Annual General Meeting for approval. An employee stock option program was approved for the years 2007–2008. No allotment took place, since the targets were not achieved.

Internal audit

The company has a simple legal and operative structure with established management and internal control systems. The Board of Directors and the Audit Committee monitor the company's assessment of internal controls, in part through contact with the company's auditors. For these reasons, the Board of Directors has elected not to have a dedicated internal audit function.

Auditors

The 2008 Annual General Meeting elected the auditing firm Ernst & Young as the company's auditor for the period up until the 2012 Annual General Meeting, with Björn Fernström as auditor in charge up until the 2009 Annual General Meeting, at which time he will resign as auditor in charge in accordance with the prevailing recommendation for a maximum assignment period of seven years. The auditors are presented on page 40 of the Annual Report. The auditors work in accordance with an audit plan, in which opinions from the Audit Committee and the Board of Directors were included, and reported its observations to the Audit Committee and the Board of Directors, in part during the audit itself and in part in conjunction with adoption of the 2008 year-end report on February 12, 2009. The auditors also participate in the Annual General Meeting at which they report on their work and observations. During the year, the auditors had consulting assignments apart from auditing, primarily relating to taxes.

Internal controls

Description of how internal controls are organized

Control environment – Effective working procedures on the part of the Board of Directors are the basis for satisfactory internal controls. Munters' Board of Directors has an established Working Procedure for its work and instructions for the Board's committees. One aspect of the Board's work consists of formulating and approving the policies that govern the Company's work with internal controls. Another aspect is creating prerequisites for an organizational structure with clear roles and responsibilities that encourage effective management of business risks. Senior management is responsible for implementing the guidelines to maintain satisfactory internal controls.

Risk assessment and control activities – Munters' management annually presents its view of significant risks for the Board of Directors' Audit Committee. The Company's most important risks relating to accounting and reporting are revenue recognition, valuation of accounts receivable and guarantee commitments, plus the Group's many small subsidiaries, which lack critical mass with respect to accounting personnel. To effectively manage significant risks, Munters has established control structures that in part consist of an organization, which, from an international perspective, permits appropriate delegation of responsibility from the standpoint of control activities in the work performed on compiling the financial reports. During 2006, the company reviewed its internal control policy and introduced a formalized process whereby all Group business units implement a self-assessment of their compliance with the rules stipulated in the internal control policy. This self assessment is then reviewed by representatives of Group management according to a rolling schedule, and by the company's external auditors. In the event of discrepancies, improvement plans and activities are prepared.

Information and communication – Munters' policies for internal control are primarily communicated through the Munters Management Manual and the Munters Financial Manual. These manuals are updated continuously and are easily accessible to all concerned personnel via Lotus Notes internal databases. The Munters Management Manual includes the Munters Information Policy, which provides guidelines for how external communication shall take place. The objective of the policy is to ensure that all information obligations are fulfilled in a correct and comprehensive manner.

Follow-up – The Board of Directors evaluates business performance and results each month using an appropriately structured reporting package containing outcomes, forecasts and analyses of important key parameters. The Board of Directors receives regular reports from the meetings held between the Audit Committee and senior management and the auditors.

The Audit Committee's work also includes regularly following up the effectiveness of internal controls. The Committee's work also includes evaluation and discussion of key technical issues relating to accounting and reporting techniques. Furthermore, the Audit Committee has initiated an annual process to ensure that appropriate measures are taken to address and implement recommended measures in regard to deficiencies that arise in part from internal follow-ups as described above and in part through the external auditors' examinations.

Articles of Association

The company's Articles of Association regulate such matters as the objective of the company's operations, the number of Board members and auditors, how notification of the Annual General Meeting shall take place, matters to be addressed by the Annual General Meeting and where the Meeting shall be held. The Articles of Association currently in effect and adopted on April 22, 2008 are available on the company's web site at www.munters.com, under investor relations/corporate governance.

Policy documents

In addition to the budget and strategic plan, which are required and approved by the Board of Directors, Munters has two primary control systems that specify authority and responsibilities for the leaders of Munters' many business units.

Firstly, there is Munters Management Manual, which, in addition to a number of general policies for the Group's business and its employees, contains detailed descriptions of authorization and responsibility in business management. The following policies are included in Munters Management Manual.

• Ethical Guidelines – The Group's ethical guidelines were formulated with the objective of documenting the Group's basic view on ethical issues both within the organization and externally towards customers and suppliers
• Information Policy – The Group's information policy is a document that describes the Group's general principles for the dissemination of information
• Insider Policy – The Group's insider policy regulates the handling of insider issues and responsibility for these issues and contains instructions for insiders and others within the organization regarding how to act in insider-related matters.
• Visual Guidelines – The Group's Visual Guidelines describe the manner in which Munters shall be visible in its marketing and business operations
• Environment Policy – The Group's environment policy provides guidelines for environmental work within the Group
• Quality Policy – The Group's quality policy provides guidelines for quality work within the Group
• Corporate Social Responsibility – The Group's CSR policy summarizes the Company's views on ethical, environmental and social responsibility
• Health and Safety Policy – The Group's health and safety policy describes the Group's views on health and safety issues.

Secondly, there is Munters Financial Manual. The Financial Manual describes the rules and guidelines that apply for decisions on financial matters, how financial reporting is organized and what is reported. The accounting instructions in Munters Financial Manual comply with IFRS standards. In addition to accounting instructions, the manual contains the following policies.

• Financial Policy – The Group's Finance function works according to the instructions established by the Board of Directors, which provide a framework for how the Group's operations shall be financed and how currency and interest risks, for example, must be managed
• Internal Control Policy – The internal control policy provides instructions for maintaining order and control within the business units.

General policies are reviewed and approved by the Board of Directors.

The company's application of the Code

The Code is built on the "comply or explain" principle. This means that companies applying the Code may deviate from individual rules but must provide explanations and reasons for each reported deviation. Munters has not deviated from the rules of the Code.

Review

This Corporate Governance Report has not been reviewed by the company's auditors.

1 Anders Ilstam

Chairman since 2008. Born 1941. Member since 2005. Background: Commercial engineer, Vice President Sandvik AB, President Sandvik Mining and Construction, CTT Tools, SKF Tools and several companies within Beijerinvest AB. Chairman of Seco Tools AB, Beijer Electronics AB, Air Liquide AB and Grimaldi Industri AB. Board member of Isaberg Rapid AB.

2 Lars Engström

Member since 2007. Born 1963. President and CEO. Employed since 2006. Background: M.Sc. Linköping Technical University. Various positions within Atlas Copco in Sweden and Australia, most recently as President of Atlas Copco Underground Rock Excavation Division. Board member of Studsvik AB. Shares held: 43,000. Options held: 25,000.

3 Eva-Lotta Kraft

Member since 2004. Born 1951. Background: MSc Chem Eng, MBA. Employed earlier by AGA and Alfa Laval, Division Manager and Executive Vice President at Siemens-Elema

AB, Department Manager FOI (The Swedish Defense Research Agency). Board member of AB Ångpanneföreningen, Samhall AB and Svolder AB. Shares held: 4,500.

4 Bengt Kjell

Member since 2003. Born 1954. Background: BSc from Stockholm School of Economics. Executive Vice President of AB Industrivärden. Authorized Public Accountant, Head of Corporate Finance Securum, Senior Partner Navet AB. Chairman of Kungsleden AB and Indutrade AB. Board member of Skanska AB, Höganäs AB, Pandox AB and Helsingborgs Dagblad AB.

5 Sören Mellstig

Member since 1997. Born 1951. Background: MSc Econ. CFO and Executive Vice President of Incentive, Business Area Manager Gambro Renal Products and Executive Vice President Gambro, CEO and President of Gambro AB. Chairman of Aleris AB, Vatus Medical AB and Textilia AB. Board member of Trelleborg AB (publ.), Ferrosan A/S, PaloDex Oy, Dako A/S and Rindi Energi AB. Shares held: 20,400.

6 Jan Svensson

Member since 2004. Born 1956. President of Investment AB Latour. Background: BSc Econ, the Stockholm School of Economics, BSc Mech Eng. President of AB Sigfrid Stenberg. Chairman of OEM International AB, Fagerhult AB and Nederman Holding AB. Board member of Loomis AB and Oxeon AB. Shares held: 5,000.

7 Kjell Åkesson

Member since 2008. Born 1949. Background: B.Sc. Econ. Uppsala University. President of Lindab International AB and Bilia AB, Vice President of Svedala AB, various positions within ASEA/ ABB. Chairman of Gullbergs AB. Board member of Inwido AB, Lindab International AB, Ballingslöv AB and PEAB Industri AB. Shares held: 4,600.

8 Kenneth Eriksson

Member since 2008. Born 1944. Chief Operating Officer of SCA, Background: B.Sc. Engineering, President of SCA Forest Products and various positions within SCA. Board member of Fastighetsbolaget Norrporten, Norrlandsfonden, SCA Forest Products and subsidiaries.

9 Kjell Wiberg

Member since 2005. Born 1958. Background: Plumber. Employee representative appointed by the Swedish Trade Union Confederation. Shares held: 100.

10 Ulf Wallén

Member since 2007. Born 1963. Background: Installer. Employee representative appointed by the Swedish Trade Union Confederation.

11 Pia Nordquist

Member since 2004. Born 1973. Background: Order/ production planning, IT Support for business systems. Employee representative appointed by the Swedish Union of Clerical and Technical Employees in Industry.

Board secretary

Peter Idsäter, Attorney, born 1960. Partner Mannheimer Swartling Advokatbyrå AB.

Auditor

Auditing firm Ernst & Young AB. Auditor since 2002. Auditor in charge: Björn Fernström. Authorized Public Accountant. Born 1950.

Information is as of March 6, 2009.

Board of Directors' report

The Board of Directors and the President of Munters AB (publ), corp. reg. no. 556041-0606, hereby submit the annual report and the consolidated accounts for the fiscal year 2008.

Information about operations

Munters is a globally leading supplier of energy-efficient solutions for air treatment and damage control based on its expertise in technologies for humidity and climate control. Its business is organized in two product divisions focused on industrial-process air treatment, comfort-oriented climate control (DH) and climate control for the AgHort industry (HC) and a global service organization with a world-leading position in damage restoration and temporary climate control (MCS).

Customers are found within a number of different sectors, of which the largest are the insurance, food, pharmaceuticals and electronics industries. Manufacturing, sales and service are conducted by slightly more than 4,100 employees in own companies in more than 30 countries.

The Munters share has been listed on the NASDAQ OMX Nordic Exchange Stockholm since 1997.

Significant events during the fiscal year and future development Group

Munters' development during the fiscal year was characterized by a relatively strong first half of the year, which thereafter changed to a significantly tougher business climate, due to the general economic recession and the financial crisis now in progress. An action program, MEP² , had already been launched at the beginning of the year to increase efficiency in all divisions. The program is based on the principles of resource-efficient manufacturing, short lead times and high employee involvement. Within MCS, work was focused on implementing the mobile IT system Field.Link in five of our most important markets. The program was concluded in the month of December.

During the second half of the year, additional measures were taken to adapt the organization to the prevailing market prerequisites. These measures further improved Munters' structure and competitiveness and are expected to result in positive effects on profitability when our markets recover again.

There is an increasing awareness relating to energy savings and environmental conservation. At the same time, knowledge of the importance of the indoor climate for both health and production processes is increasing. These trends favor Munters, which has a service and product portfolio that meets these needs. Munters' strategy is to further expand its product portfolio. This strategy includes complimentary acquisitions.

The prevailing market conditions mean that the divisions continue to adapt their respective resources to current business volumes through efficiency-enhancing measures and personnel reductions. In recent years, Munters has focused strongly on profit-enhancing measures. This should have a positive effect on gross margins when the financial crisis is over and the economy begins recovering. Although the coming period is characterized by considerable uncertainty, Munters is convinced that the Group will emerge strengthened from the current recession.

Dehumidification division

Within the Dehumidification division, the market for dehumidifiers in the Industrial business area remained strong during the year, despite signs of weaker market conditions toward the end of the fourth quarter. Demand in the Commercial business area was weak during most of the year, particularly in the retail segment, but recovered during the fourth quarter. The division's margins were negatively affected by guarantee costs due to faulty components from a third party.

Measures within MEP² were implemented and completed during the fourth quarter. A reorganization was implemented during the second quarter with the objective of taking advantage of growth opportunities in energy-efficient solutions for air treatment. Measures to reduce personnel and thus further lower costs were implemented during the second half of the year in response to weaker market conditions. The acquisition of Toussaint Nyssenne was completed during the autumn. The order backlog was relatively favorable at the end of the year.

HumiCool division

Within the HumiCool division, market growth was strong for all business areas during the first half of the year with the exception HVAC, which experienced weak demand for mobile heaters after a mild winter. After the summer, all business areas were sharply affected by turmoil in the global credit markets, which resulted in distributors experiencing difficulty with short-term financing and thus reducing their inventories. A dramatic reversal in the AgHort market became evident in the beginning of the fourth quarter, with the US market leading the downturn. The driving factor over the short term was the lack of financing, but a rapid increase in the price of livestock feed that was not reflected in meat prices dramatically decreased incentives to invest.

Earnings during the year were affected by a nonrecurring cost of SEK 10 M as a result of a major US customer in the HVAC segment entering bankruptcy. To meet the lower market activity in several segments, adaptation of the workforce continued, which will be combined with additional changes in the production structure. The MEP² program was implemented, resulting in a charge against earnings of SEK 22 M. Work primarily involved the units in Mexico and Germany. In addition, production shifts from Italy to China and from Sweden to Mexico were completed.

MCS division

The MCS division reported favorable sales growth during the year. Very strong sales and operating income were noted in the US during the second half of the year as a result of weatherrelated events. In the European market, Munters continued to capture market share, in part due to new framework agreements and strengthened partnerships with existing customers.

However, the division's earnings were affected by continued inflationary cost pressures with respect to salaries and fuels, although some relief was noted toward the end of the year. Costs for the MEP² program concluded in December amounted to SEK 55 M. The program comprised implementation of the mobile IT system Field.Link and introduction of sharply improved processing of accounts receivable that included write-downs of outstanding receivables in line with the new credit policy for MCS. Nonrecurring costs of SEK 45 M, primarily relating to preparations for the phase-out of certain operations, were also charged against the year's earnings.

The long-term consolidation trends with a constantly increasing proportion of fixed framework agreements continued, and several new framework agreements were signed during the second half of the year with major insurance companies in all regions. In conjunction with the introduction of the mobile IT system Field.Link in more markets, the number of depots is being decreased, while certain central functions are being established in each country. The new business model will enable productivity to be sharply improved over time.

Significant events after the end of the fiscal year

During the first quarter of 2009, Munters will be implementing a number of measures within all three divisions to adapt operations in response to the weaker market conditions. These measures, which are expected to entail personnel reductions of about 250 persons, will result in nonrecurring costs in the order of SEK 30–45 M, which will be charged against first-quarter earnings. Further information is available in Note 31, Events after the closing date.

Order intake and net sales

During the year, the Group's order intake increased by 2 percent (unchanged after adjustments for currency effects, acquisitions and disposals of operations) to SEK 6,515 M (6,407). The Dehumidification and MCS divisions experienced favorable order growth during the year, while HumiCool's order intake declined. The order backlog increased by slightly more than 15 percent and was SEK 1,330 M (1,152) at year-end.

Net sales increased during the year by 5 percent (3 percent adjusted) to SEK 6,570 M (6,262). The Dehumidification and MCS divisions increased sales, while HumiCool's net sales decreased, particularly during the final quarter of the year.

Gross earnings

Gross earnings declined somewhat to SEK 1,716 M (1,759). The gross margin fell to 26.1 percent (28.1).

Indirect costs

Sales and administration costs increased by 14 percent to SEK 1,277 M (1,117), corresponding to 19.4 percent (17.8) of net sales. Research and development costs amounted to SEK 85 M (70), corresponding to 1.3 percent (1.1) of net

sales. Development costs in conjunction with customer order projects are reported as a cost in ongoing operations.

Earnings

EBIT decreased by 36 percent to SEK 362 M (566). All divisions reported a decline in operating earnings, compared with the preceding year: Dehumidification SEK 201 M (234), HumiCool SEK 155 M (251) and MCS SEK 48 M (129). The operating margin declined to 5.5 percent (9.0).

Charges against full-year earnings were impacted by SEK 86 M in costs for the MEP² program and SEK 68 M in costs for confirmed and anticipated credit losses, quality problems in purchased components and closure and merger costs. The MEP² program is now completed.

Earnings before depreciation of acquisition-related intangible assets and nonrecurring costs amounted to SEK 525 M (597).

Financial items

Net financial items declined to an expense of SEK 77 M (expense: 40), primarily due to increased indebtedness on a full-year basis in combination with higher interest rates. Capital distribution and acquisitions implemented during the second half of 2007 did not achieve full effect in increasing interest expenses for the full-year 2007, compared with 2008.

Earnings trend

Taxes

0.0 0.2 0.4 0.6 0.8 0 20 40 2004 2005 2006 2007 2008 Tax expenses for the year amounted to SEK 120 M (190), corresponding to an effective tax rate of 42 percent (36). The increase in the tax burden was almost entirely attributable to changed tax rules in Italy, which is one of the Group's major manufacturing countries. The outcome of several tax audits completed during the year also contributed to a minor portion of the increase. In other respects, the high effective tax rate is the result of a significant portion of the Group's profits being generated in subsidiaries in countries with higher tax rates than Sweden, non-income related taxes in certain countries and costs that are non-deductible for tax purposes.

6,000 Investments

1,000

4,000 5,000 The Group's investments in tangible fixed assets during the period amounted to SEK 145 M (185), of which a large portion, SEK 49 M (82), pertained to investments in MCS equipment. The remaining increase was primarily attributable to investments in production equipment in existing plants. Investments

1500

in intangible assets excluding goodwill and other acquisitionrelated intangible assets amounted to SEK 12 M (25). Depreciation and impairment amounted to SEK 167 M (156).

Financial position

The equity ratio decreased to 28 percent at year-end (31 at the start of the year). Interest-bearing assets totaled SEK 490 M (276 at the start of the year) and interest-bearing provisions and liabilities amounted to SEK 1,880 M (1,344 at the start of the year). Net debt during the year rose by SEK 322 M to SEK 1,390 M as a result of acquisition of Toussaint Nyssenne and Munters Form totaling SEK 102 M, an ordinary dividend of SEK 185 M and exchange-rate fluctuations. The Group has a credit facility approved on general terms amounting to SEK 2,190 M (2,177), of which the largest portion, SEK 2,000 M is a syndicated credit facility extending until 2012. The Group has unutilized loan facilities of SEK 545 M. (1,019).

Parent Company

Munter AB's operations comprise Group-wide functions, as well as certain functions for the MCS Division. The Parent Company's earnings after financial items during 2008 amounted to SEK 225 M (257). Dividends received from subsidiaries were included in an amount of SEK 250 M (258). There were no external net sales. Cash and cash equivalents at the close of the period amounted to SEK 227 M (75) and net debt to SEK 1,449 M (1,099). Capital expenditure totaled SEK 11 M (21). The number of employees during the year was 30 (24).

Financial instruments

The use of financial instruments apart from those arising in ongoing operations is relatively limited in the Munters Group. In addition to the options specified in Note 29, they consist primarily of currency hedges and interest-bearing borrowing from banks. Further information on the Group's financial instruments is presented in Notes 3 and 18.

Research and development

Munters starting point in developing new or refining existing technologies is that the new models must be more energyefficient than the old ones. Investments in research and development have increased by 64 percent since 2006 and now account for 6 percent of operating costs. 3,000 4,500 6,000

During 2008, product development resources were added with the acquisition of Toussaint Nyssenne. Build-up of a product development organization was begun in China and is expected to be completed by the end of 2009. Investments in global product platforms and a global organization continued. Toward the end of the year, Dehumidification launched a newly developed dehumidifier that will be sold in all regions. Major resources were devoted during the year to adapting existing products for new markets and new production locations. More efficient control of product development was achieved through the implementation of a structured development process.

Information regarding environmental impact in accordance with Swedish legislation

Munters' operations affect the external environment through emissions to air and water, handling of chemicals and transports of component parts and finished products to and from manufacturing plants. The Group conducts operations requiring a type B permit according to the Swedish Environmental Code at its Swedish subsidiary Munters Europe AB. The permit includes all production operations in Tobo, Sweden and is valid until further notice. The Group's operations with permit and reporting obligations impact the external environment at Munters Europe's plant in Tobo through emissions to air and water. There are also noise restrictions. There are no injunctions in these areas. Production operations are environmentally certified in accordance with ISO 14000. The products are continuously adapted to the EU's various environmental directives. Chemicals and other hazardous waste are collected and submitted to an external processor of hazardous waste. In developing new products, Munters' goal is to reduce the impact on the environment. 0 1,500 3,000 4,500 6,000 7,500 9,000

Personnel

At the end of the period, the number of permanent employees was 4,132, a decrease of 92 since year-end 2007, adjusted for acquisitions. Companies acquired during the year contributed 140 new employees. The average number of employees during the year, including temporary employees, was 4,291, a decline of 0.5 percent, compared with the preceding year. The proportion of women was 19 percent (19). Personnel turnover increased during the year to 17 percent (13) for the Group as a whole. This relatively high level is due to several factors. Restructuring during the year increased turnover, compared with previous 6000 7500 9000 0.0 0.2 0.4 0.6 1.0 1.2 20 2004 2005 2006 2007 2008

Total assets and equity

3000

years. Europe has a high proportion of MCS personnel, which is traditionally a highly mobile personnel category. Asia consists of several young companies with a large share of production where personnel mobility is still relatively high. Munters is in large part a young company. A full 52 percent of the workforce is under 40. The average age is 40 years (38).

Significant risks and uncertainties

Munters' exposure to risk can be divided primarily into two categories: operational risks and financial risks. Operational risks are those due to weather, dependence on key personnel and key customers, and geographically dispersed operations involving small operational units. Financial risks consist mainly of currency, interest and financing risks.

Demand for the company's products is affected by general economic trends. The weakened economic conditions resulted in lower sales, which also reduced capacity utilization in manufacturing over the short term. The continuing trend in the global economy is an uncertainty factor for the earnings trend for 2009. Munters' acquisition frequency may result in integration-related risks. In addition, it is estimated that the financial risks, primarily interest-rate risks and currency risks, have increased somewhat in the current and past year.

A more detailed description of the business's operational and financial risks and how they are controlled and managed is presented in the section Risks and risk management on pages 32–33 and in Note 3.

The Munters share and ownership structure

The Munters share is listed on the NASDAQ OMX Nordic Exchange Stockholm. On December 31, 2008, Munters' share capital was distributed among 75,000,000 shares. The company has one class of stock. Each share carries one vote without restrictions at the Annual General Meeting. All shares carry equal rights to the company's assets and earnings. There are no restrictions on transfer of shares according to law or the company's Articles of Association. As far as Group management and the Board of Directors are aware, there are no agreements between shareholders that may entail restrictions on the right to transfer shares.

In order to meet obligations for the outstanding options program, the company holds 1,066,950 treasury shares. Holdings of treasury shares comprise 1.4 percent of the total share capital.

On December 31, 2008, the ten largest owners in Munters controlled 66 percent (60) of the voting rights. The two largest owners are Latour and Industrivärden, which each control 14.8 percent of the voting rights. No other shareholder controls directly or indirectly more than 10 percent of the voting rights.

Members and deputy members of the Board of Directors are elected at the Annual General Meeting for the period until the end of the first general meeting held after the year the member was elected. Changes in the Articles of Association are decided by the Annual General Meeting.

The Board of Directors' proposal for approval of guidelines for compensation to senior executives

The Board of Directors of Munters AB proposes that the Annual General Meeting on April 15, 2009 approve guidelines for compensation to senior managers in the company according to the following.

Salaries for senior managers shall be competitive and on market terms and have other terms of employment that correspond to the manager's responsibility, authority, expertise and experience. Reconciliation of total compensation against market statistics and other information shall be performed regularly.

In addition to a fixed annual salary, senior managers may also receive a variable salary, which will be based on the Group's earnings per share, cash flow, strategic development or other parameters for the President and for other managers on improvements in the manager's area of responsibility with respect to sales, operating earnings and capital turnover rate, as well as the outcome of individual activity plans or other parameters. The variable salary component shall correspond to at most 50 percent of the fixed annual salary for the President and at most between 30 and 70 percent for other senior managers. The Board of Directors is also entitled to resolve on programs relating to long-term variable salary, subject to the condition that the outcome of such a program corresponds to at most 50 percent of fixed annual salary.

The company may subsidize or compensate interest expenses for senior managers' acquisition of shares for which the manager assumes all risk.

The notice period between senior managers and the company shall not be longer than six months, and severance pay shall not amount to more than 18 months (base salary) for the President and 12 months (base salary) for other senior managers.

Pension entitlement shall apply from the age of 62 at the earliest. The President is covered by a premium-based pension plan according to which the premium may amount to at most 35 percent of the base salary. Other senior managers residing in Sweden are covered by a premium-based plan coordinated with the ITP plan, where the agreed premium provision may amount to at most 35 percent of base salary. Senior managers not residing in Sweden may be offered pension plans that are competitive in the countries where they reside.

Each year, the Board of Directors shall consider whether or not share-related incentive programs shall be proposed to the Annual General Meeting. Share-related incentive programs that are not approved by the Annual General meeting are not allowed.

Fees for Board members are established by the Annual General Meeting. If a Board member is employed by the company, compensation shall be paid to the Board member according to these guidelines, whereby special compensation for the assignment as a Board member shall not be paid. If a Board member performs assignments for the company that are not Board assignments, compensation shall be paid on market terms with consideration taken to the nature of the assignment and the work involved.

These guidelines shall apply to those persons who during the period in which the guidelines apply are members of Group management, other managers in senior positions who report directly to the President and Board members of the company. The guidelines apply for contracts entered after the closing of the Annual General Meeting and in cases in which changes are made in existing contracts after that date. The Board of Directors shall have the right to deviate from these guidelines if there are special reasons in an individual case, subject to the condition that this decision is reported and motivated at a later date.

The most recently approved guidelines are presented in Note 28.

GROUP		IFRS1					Prior accounting principles1
Order intake, sales and profit	2008	2007	2006	2005	2004	2003	2002	2001	2000	1999
Order intake, SEK M	6,515	6,407	5,761	5,340	4,598	4,305	4,727	3,945	3,322	2,608
Net sales, SEK M	6,570	6,262	5,712	5,130	4,543	4,308	4,666	3,894	3,179	2,594
Growth, %	4.9	9.6	11.3	12.9	5.5	–7.7	19.8	22.5	22.5	8.0
EBIT, SEK M	362	566	529	405	334	298	465	401	306,2	237
EBIT-margin, %	5.5	9.0	9.3	7.9	7.3	6.9	10.0	10.3	9.6,2	9.1
Earnings after financial items, SEK M	285	526	514	391	318	280	436	389	289,2	231
Net earnings, SEK M	165	336	328	252	200	172	266	239	184	144
Return figures and balance sheet3
Equity, SEK M	1,285	1,202	1,506	1,437	1,148	1,086	1,114	1,012	821	655
Return on equity, %	13.8	25.7	22.5	19.3	17.8	15.8	25.6	26.7	26.0	24.8
Capital employed, SEK M	2,726	2,340	1,915	1,802	1,606	1,553	1,617	1,360	1,242	1,006
Return on capital employed, %	13.6	24.8	28.0	22.8	21.0	19.1	30.8	31.8	28.3,2	29.9
Return on operating capital, %	18.5	31.8	32.7	26.2	23.1	22.2	33.7	29.3	26.0	26.0
Capital turnover rate, multiple	2.4	2.7	3.0	2.8	2.8	2.7	3.1	3.0	2.8	3.1
Total assets, SEK M	4,614	3,862	3,144	2,946	2,440	2,365	2,732	2,228	1,993	1,689
Equity/assets ratio, %	27.8	31.1	47.9	48.8	47.0	46.1	41.0	45.4	41.2	38.8
Net debt, SEK M	1,390	1,068	257	315	351	338	365	196	333	230
Net debt/equity ratio, multiple	1.08	0.89	0.17	0.22	0.31	0.31	0.33	0.19	0.41	0.35
Interest-coverage ratio, multiple	4.4	10.7	25.0	20.2	17.7	11.3	14.2	16.3	11.7,2	13.1
Other key figures
Investments in tangible fixed assets, SEK	145	185	153	126	108	130	183	140	148	114
Operating cash flow, SEK M	177	189	375	181	121	125	230	236	–31	–55
Average number of employees	4,291	4,268	3,644	3,303	3,207	3,162	3,100	2,541	2,311	2,086

1 Financial statements from 2004 have been prepared in accordance with IFRS. The main difference compared with prior accounting principles is that goodwill is no longer amortized according to plan.

2 Excluding items affecting comparability in an amount of SEK 15 M relating to surplus funds from pension management in Alecta.

3 From January 1, 2006, Munters has changed its accounting in accordance with the changes in IAS 19 so that actuarial gains and losses are now recognized in equity. Key figures for 2005 are restated to comply with the changes.

Definitions are presented on page 85.

Dehumidification division

Operating cash flow and net debt

HumiCool division

Capital turnover rate and return on capital employed

MCS division

Return on equity

DIVISIONS

Dehumidification division	2008	2007	2006	2005	2004	2003	2002	2001	2000	1999
Order intake, SEK M	2,133	2,001	1,693	1,500	1,352	1,275	1,482	1,532	1,346	1,132
Net sales, SEK M	2,051	1,936	1,635	1,514	1,344	1,262	1,503	1,501	1,284	1,094
Growth, %	5.9	18.4	8.0	12.6	6.5	–16.0	0.2	16.9	17.4	2.5
Operating earnings, SEK M	201	234	194	159	138	109	163	152	136	81
Operating margin, %	9.8	12.1	11.9	10.5	10.3	8.7	10.8	10.1	10.6	7.4
Operating capital, SEK M	590	481	383	422	362	369	380	438	426	402
Return on operating capital, %	38.7	52.0	50.4	40.9	39.2	29.3	40.6	34.2	35.0	21.6
No. of permanent employees at period-end	1,301	1,180	900	853	781	771	816	798	802	739
HumiCool division
Order intake, SEK M	1,644	1,837	1,585	1,460	1,178	1,080	1,258	1,108	993	669
Net sales, SEK M	1,743	1,765	1,514	1,343	1,138	1,103	1,215	1,079	966	689
Growth, %	–1.2	16.5	12.8	18.0	3.2	–9.2	12.6	11.8	40.2	8.9
Operating earnings, SEK M	155	251	213	135	88	127	164	139	139	84
Operating margin, %	8.9	14.2	14.1	10.1	7.8	11.5	13.5	12.9	14.4	12.2
Operating capital, SEK M	581	497	391	440	432	474	513	470	476	392
Return on operating capital, %	27.5	52.3	51.1	29.2	18.2	24.6	31.6	28.6	31.5	27.2
No. of permanent employees at period-end	866	924	789	668	649	661	737	634	623	567
MCS division
Order intake, SEK M	2,770	2,630	2,541	2,444	2,102	1,987	2,041	1,331	1,008	835
Net sales, SEK M	2,809	2,624	2,618	2,335	2,095	1,982	2,004	1,338	961	833
Growth, %	7.1	0.2	12.1	11.5	5.7	–1.1	49.7	39.3	15.4	15.5
Operating earnings, SEK M	48	129	159	153	141	122	192	153	83	97
Operating margin, %	1.7	4.9	6.1	6.5	6.7	6.2	9.6	11.4	8.6	11.7
Operating capital, SEK M	854	895	811	862	683	580	682	450	377	292
Return on operating capital, %	5.5	15.5	19.7	21.8	23.0	19.6	33.4	36.3	25.4	38.6
No. of permanent employees at period-end	1,944	1,918	1,845	1,706	1,615	1,618	1,620	1,135	940	827
GEOGRAPHIC REGIONS
Europe
Net sales, SEK M	4,055	3,838	3,412	3,056	2,705	2,658	2,731	1,949	1,674	1,404
Growth, %	5.7	12.5	11.6	13.0	1.8	–2.7	40.2	16.4	19.3	6.0
Americas
Net sales, SEK M	2,145	2041	1,872	1,683	1,501	1,347	1,577	1,592	1,231	970
Growth, %	5.1	9.1	11.2	12.1	11.4	–14.6	–0.9	29.4	26.9	9.6
Asia
Net sales, SEK M	562	510	529	484	419	372	427	408	335	279
Growth, %	10.3	–3.6	9.3	15.6	12.7	–12.9	4.7	21.8	20.1	16.9

GROUP			2008				2007				2006
Order intake, net sales and earnings	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Order intake, SEK M	1,661	1,582	1,686	1,586	1,518	1,674	1,688	1,527	1,311	1,362	1,573	1,515
Net sales, SEK M	1,881	1,597	1,548	1,545	1,737	1,597	1,524	1,404	1,462	1,408	1,456	1,386
Growth, %	8.4	0.0	1.6	10.0	18.7	13.4	4.7	1.3	–5.2	6.9	22.1	28.5
EBIT, SEK M	76	82	95	108	171	149	119	127	143	140	129	118
EBIT margin, %	4.0	5.1	6.1	7.0	9.8	9.3	7.8	9.0	9.8	9.9	8.8	8.5
Net earnings, SEK M	18	40	49	58	101	87	70	78	92	86	79	71
Other key figures1
Investments in tangible assets, SEK M	32	29	41	43	42	56	53	34	53	44	26	30
Operating cash flow, SEK M	158	49	13	-43	161	–25	8	45	61	138	110	66
Net debt, SEK M	1,390	1,311	1,292	1,119	1,068	1,245	1,138	209	257	127	258	229
Net debt/equity ratio, multiple	1.08	1.10	1.20	0.93	0.89	1.16	1.07	0.13	0.17	0.09	0.19	0.15
Interest-coverage ratio, multiple	3.1	3.6	5.5	6.3	8.9	8.9	11.1	22.2	21.1	28.3	27.2	24.9
No. of permanent employees at period-end	4,132	4,044	4,083	4,099	4,043	3,982	3,915	3,669	3,552	3,449	3,400	3,365
Share data1,2
Earnings per share, SEK	0.24	0.53	0.66	0.78	1.34	1.16	0.95	1.04	1.23	1.15	1.06	0.96
Equity per share, SEK	17.28	15.99	14.48	16.11	16.16	14.51	14.36	22.13	20.33	19.66	18.48	20.04
Share price at period-end, SEK	38.40	48.50	57.25	68.50	76.75		93.00 107.50 100.67		106	95	80	88
Market capitalization at period-end, SEK M	2,880	3,638	4,294	5,138	5,756	6,975	8,063	7,550	7,925	7,100	6,013	6,613

1 From January 1, 2006, Munters has changed its accounting in accordance with the changes in IAS 19 so that actuarial gains and losses are now recognized in equity. Key figures for Q4 2005 to Q3 2006 are restated to comply with changes.

2 Historical data for the share has been adjusted for the share split, redemption and bonus issue implemented in 2007.

Definitions are presented on page 85.

Group order intake

Group net sales

Group EBIT

DIVISIONS			2008				2007				2006
Dehumidification division	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2	Q1
Order intake, SEK M	608	511	528	487	460	541	556	444	355	443	465	430
Net sales, SEK M	645	495	478	433	534	504	527	371	432	423	419	360
Growth, %	20.7	–1.7	–9.4	16.7	23.6	19.0	26.0	2.8	0.4	4.8	18.4	10.8
Operating earnings, SEK M	75	48	45	33	72	55	69	38	65	51	49	29
Operating margin, %	11.7	9.6	9.5	7.6	13.5	11.0	13.1	10.2	15.0	11.9	11.8	8.1
Operating capital, SEK M	590	524	480	476	481	477	488	384	383	394	392	395
No. of permanent employees at period-end	1,301	1,173	1,196	1,184	1,180	1,151	1,126	913	900	890	877	867
HumiCool division
Order intake, SEK M	314	369	525	436	395	460	518	465	333	340	462	450
Net sales, SEK M	436	425	432	451	476	446	414	429	361	367	411	376
Growth, %	–8.5	–4.7	4.5	5.1	31.9	21.6	0.7	14.1	3.9	–2.0	16.7	39.9
Operating earnings, SEK M	23	36	44	51	73	64	55	59	44	56	62	51
Operating margin, %	5.3	8.5	10.2	11.4	15.3	14.3	13.3	13.8	12.2	15.2	15.2	13.6
Operating capital, SEK M	581	582	567	542	497	494	492	452	391	392	399	436
No. of permanent employees at period-end	866	908	914	959	924	911	855	832	789	698	672	695
MCS division
Order intake, SEK M Net sales, SEK M	746 809	709 686	643 645	672 669	673 739	690 666	634 605	633 614	636 686	601 638	654 635	650 660
Growth, %	9.5	3.0	6.6	8.9	7.8	4.4	–4.6	–7.0	–11.5	13.5	26.0	33.6
Operating earnings, SEK M	–9	7	14	36	39	42	10	38	45	39	29	46
Operating margin, %	–1.1	1.0	2.2	5.3	5.3	6.3	1.7	6.2	6.5	6.1	4.6	7.0
Operating capital, SEK M	854	880	856	871	895	885	790	805	811	779	779	824
No. of permanent employees at period-end	1,944	1,942	1,952	1,938	1,918	1,903	1,916	1,906	1,845	1,842	1,830	1,784
GEOGRAPHIC REGIONS
Europe
Net sales, SEK M	1,141	969	965	981	1,124	960	861	893	947	814	845	806
Growth, %	1.5	0.9	12.1	9.8	18.7	18.0	1.8	10.8	8.3	3.6	14.1	22.9
Americas
Net sales, SEK M	637	543	490	475	499	550	560	432	412	487	498	474
Growth, %	27.5	–1.2	–12.6	10.0	21.1	13.0	12.4	–8.9	–27.3	13.5	37.2	46.3
Asia
Net sales, SEK M Growth, %	150 5.5	137 13.2	139 3.0	136 21.9	142 3.1	121 –7.7	135 0.5	112 –11.2	138 8.7	132 4.9	134 16.4	126 7.5

Amounts in SEK M	Notes	2008	2007
Net sales	5	6,570	6,262
Cost of goods sold		–4,854	–4,503
Gross earnings		1,716	1,759
Other operating income	6	11	0
Selling costs		–764	–653
Administrative costs		–513	–464
Research and development costs		–85	–70
Other operating expenses	6	–3	–6
EBIT – Earnings before interest and tax	7, 8	362	566
Financial income	9	8	14
Financial expenses	9	–85	–54
Earnings after financial items		285	526
Tax	10	–120	–190
Net earnings		165	336
Attributable to:
Shareholders in the Parent Company		163	332
Minority interest		2	4
		165	336
Earnings per share1
– before dilution, SEK	11	2.21	4.49
– after dilution, SEK	11	2.21	4.49

Attributable to shareholders in the Parent Company.

Amounts in SEK M	Notes	2008	2007
OPERATING ACTIVITIES
Earnings after financial items		285	526
Reversal of items not affecting liquidity
Depreciation and impairments	7	167	156
Earnings from divestment and disposals of fixed assets		1	1
Provisions for pensions and similar commitments		38	1
Other provisions		–18	–20
Other profit/loss items not affecting liquidity		–5	–1
Total items not affecting liquidity		183	137
Taxes paid		–181	–187
Cash flow from operating activities before changes in working capital		287	476
Cash flow from changes in working capital
Changes in inventory		43	–28
Changes in accounts receivable		127	–102
Changes in other receivables		–17	–15
Changes in accounts payable		–59	31
Changes in other liabilities		–53	33
		41	–81
Cash flow from operating activities		328	395
INVESTING ACTIVITIES
Acquisitions of enterprises	4, 14	–87	–316
Sale of business segments	6	3	–
Investments in tangible assets	12	–145	–185
Investments in intangible assets	13	–12	–25
Sales of tangible assets		5	4
Changes in other financial assets		1	–
Cash flow from investing activities		–235	–522
FINANCING ACTIVITIES
Loans raised		409	1,061
Amortization of loans		–133	–214
Dividend paid		–189	–166
Redemption of treasury shares	19	–	–494
Sales of treasury stock Cash flow from financing activities		– 87	11 198
Cash flow for the year		180	71
Cash and cash equivalents at the beginning of the year		276	201
Exchange-rate differences in cash and cash equivalents		34	4
Cash and cash equivalents at end of year		490	276
Interest received		7	8
Interest paid		73	44
OPERATING CASH FLOW
Operating cash flow		177	189
NET DEBT
Short-term interest-bearing liabilities		41	32
Long-term interest-bearing liabilities		1,653	1,168
Defined-benefit pension plans		186	144
Interest-bearing assets		–490	–276
Net debt		1,390	1,068

Balance sheet – Group

Amounts in SEK M at December 31	Notes	2008	2007
ASSETS
Fixed assets
Buildings and land	12	209	172
Plant and machinery	12	149	144
Equipment, tools, fixtures and fittings	8, 12	294	262
Construction in progress	12	12	22
Patents, licenses, brands and similar rights	13	143	110
Goodwill	14	978	794
Participation in associated companies	16	2	2
Other financial assets		20	19
Deferred tax assets	10	126	62
Total fixed assets		1,933	1,587
Current assets
Raw materials and consumables		221	190
Products in process		86	73
Finished products and goods for resale		178	170
Work in progress		97	91
Advances to suppliers		7	12
Accounts receivable	3	1,354	1,292
Prepaid expenses and accrued income	17	117	65
Derivative instruments	18	1	0
Current income taxes		59	48
Other financial assets		71	58
Cash and cash equivalents		490	276
Total current assets		2,681	2,275
TOTAL ASSETS		4,614	3,862

Amounts in SEK M at December 31	Notes	2008	2007
EQUITY AND LIABILITIES
Equity
Attributable to shareholders in the Parent Company	19
Share capital		131	131
Reserves		99	–37
Profit brought forward		1,048	1,101
		1,278	1,195
Minority interest	19	7	7
Total equity		1,285	1,202
Long-term liabilities
Interest-bearing liabilities	20	1,653	1,168
Provisions for pensions and similar commitments	21	208	162
Other provisions	22	2	3
Other liabilities		11	3
Deferred tax liabilities	10	87	47
Total long-term liabilities		1,961	1,383
Current liabilities
Interest-bearing liabilities	20	41	32
Advances from customers		107	99
Accounts payable		537	496
Accrued expenses and deferred income	23	430	377
Derivative instruments	18	2	1
Current income taxes		40	70
Other liabilities		143	136
Provisions for pensions and similar commitments	21	9	10
Other provisions	22	59	56
Total current liabilities		1,368	1,277
TOTAL EQUITY AND LIABILITIES		4,614	3,862
Pledged assets	24	1	5
Contingent liabilities	24	2	3

Amounts in SEK M	2008	2007
Income and expenses recognized directly in equity
Actuarial gains and losses pertaining to remuneration after termination of employment, including special employer's contribution	–44	3
Cash-flow hedges:
– profit/(loss) recognized in equity	0	0
– transferred to income statement for the period	–1	–1
Exchange-rate differences on translation of foreign subsidiaries	137	10
Tax on items recognized directly in or transferred from equity	13	0
Total income and expenses recognized directly under equity	105	12
Profit for the period reported in the income statement	165	336
Total income and expenses recognized for the period	270	348
Attributable to:
Parent Company's shareholders	268	344
Minority interests	2	4
	270	348

Refer also to Note 19.

BALANCE SHEET

INCOME STATEMENT

Amounts in SEK M	Notes	2008	2007
Net sales		51	51
Gross earnings		51	51
Selling costs		0	0
Administrative costs		–99	–78
Other operating income	6	2	2
Other operating expenses	6	1	–1
Operating earnings	7	–45	–26
Income from participations in
Group companies	9, 15	270	258
Financial income	9	71	67
Financial expenses	9	–71	–42
Earnings after financial items		225	257
Change in tax allocation reserve		–4	–15
Tax	10	14	4
Net earnings		235	246

CHANGES IN EQUITY

				Profit
Amounts in SEK M	Share capital	Statutory reserve	Premium reserve	brought forward	Total equity
December 31, 2006	125	76	2	1,066	1,269
Group contributions	–	–	–	46	46
Net profit	–	–	–	246	246
Total income and
expenses	–	–	–	292	292
Bonus issue	6	–	–	–6	0
Sale of treasury shares	–	–	–	11	11
Redemption of treasury
shares	–	–	–	–494	–494
Dividend to Parent
Company shareholders	–	–	–	–166	–166
December 31, 2007	131	76	2	703	912
Group contributions	–	–	–	44	44
Net earnings	–	–	–	235	235
Total income and
expenses	–	–	–	279	279
Dividend to Parent
Company shareholders	–	–	–	–185	–185
December 31, 2008	131	76	2	797	1,006

Amounts in SEK M at December 31	Notes	2008	2007
ASSETS
Fixed assets
Equipment, tools, fixtures and fittings		24	19
Patents, licenses, brands and similar rights		18	17
Participation in subsidiaries	15	791	690
Receivables from subsidiaries		1,783	1,385
Other financial assets		2	2
Total fixed assets		2,618	2,113
Current assets
Prepaid expenses and accrued income	17	12	6
Receivables from subsidiaries		36	82
Current income taxes		7	4
Other financial assets		37	6
Cash and cash equivalents		227	75
Total current assets		319	173
TOTAL ASSETS		2,937	2,286
EQUITY AND LIABILITIES
Equity
Share capital		131	131
Statutory reserve		76	76
Restricted equity		207	207
Premium reserve		2	2
Profit brought forward		562	457
Profit for the year		235	246
Unrestricted equity		799	705
Total equity		1,006	912
Untaxed reserves		19	15
Long-term liabilities
Interest-bearing liabilities	20	1,637	1,137
Provisions for pensions and similar
commitments	21	39	37
Total long-term liabilities		1,676	1,174
Current liabilities
Accounts payable		5	6
Accrued expenses and
deferred income	23	15	10
Liabilities to subsidiaries		197	152
Current income taxes		17	14
Other liabilities		2	3
Total current liabilities		236	185
TOTAL EQUITY AND LIABILITIES		2,937	2,286
Pledged assets	24	–	–
Contingent liabilities	24	126	110

Munters Annual Report 2008

CASH-FLOW STATEMENT

Amounts in SEK M	Notes	2008	2007
OPERATING ACTIVITIES
Earnings after financial items		225	257
Reversal of items not affecting liquidity
Depreciation and impairments	7	6	3
Earnings from divestment and
disposals of fixed assets		1	1
Provisions for pensions and similar commitments		2	1
Other profit/loss items not affecting
liquidity		195	0
Total items not affecting liquidity		204	5
Taxes paid		10	6
Cash flow from operating activities
before changes in working capital		439	268
Cash flow from changes in working capital
Changes in accounts receivable		0	0
Changes in other receivables		–309	–441
Changes in accounts payable		1	4
Changes in other liabilities		51	57
		–257	–380
Cash flow from operating activities		182	–112
INVESTING ACTIVITIES
Acquisitions of enterprises	4	–79	–
Investments in tangible assets	12	–8	–8
Investments in intangible assets	13	–4	–14
Changes in other financial assets		–57	–33
Cash flow from investing activities		–148	–55
FINANCING ACTIVITIES
Loans raised		409	1,083
Amortization of loans		–106	–214
Dividend paid		–185	–166
Redemption of treasury shares		–	–494
Sales of treasury shares		–	11
Cash flow from financing activities		118	220
Cash flow for the year		152	53
Cash and cash equivalents at the
beginning of the year		75	22
Exchange-rate differences in cash and cash equivalents		–	–
Cash and cash equivalents at
the end of the year		227	75
Interest received		71	61
Interest paid		69	41
NET DEBT
Long-term interest-bearing liabilities		1,637	1,137
Defined-benefit pension plans		39	37
Interest-bearing assets		–227	–75
Net debt		1,449	1,099

Contents, Notes

Note	Page
1	57	Accounting principles
2	63	Significant estimations and assessments
3	63	Financial risk management
4	65	Business combinations
5	67	Segment reporting
6	69	Other operating income and operating expenses
7	69	Depreciation and impairments
8	69	Leasing
9	70	Financial income and expenses
10	70	Income taxes
11	71	Earnings per share
12	71	Tangible assets
13	72	Patents, licenses, brands and similar rights
14	72	Goodwill
15	73	Participation in subsidiaries
16	73	Participation in associated companies
17	73	Prepaid expenses and accrued income
18	73	Financial instruments
19	74	Equity
20	75	Interest-bearing liabilities
21	75	Provisions for pensions and similar commitments
22	77	Other provisions
23	77	Accrued expenses and deferred income
24	77	Pledged assets and contingent liabilities
25	78	Transactions with related parties
26	78	Average number of employees, absence due to illness, gender distribution
27	79	Wages, salaries and other remuneration and social security expenses
28	79	Remuneration to Board members and senior executives
29	80	Outstanding incentive programs
30	81	Fees to auditors

• 31 81 Events after closing date
• 32 81 Company information

Amounts are stated in millions of Swedish kronor (SEK M), unless otherwise stated. Amounts in parentheses are the values for the preceding year.

NOTE 1 Accounting principles

1.1 Regulations applied

The consolidated accounts have been prepared in accordance with the International Financial Reporting Standards (IFRS). Since the Parent Company is an EU company, only IFRS approved by the EU are applied.

Moreover, the consolidated accounts have been prepared in accordance with Swedish law through the application of the Swedish Financial Reporting Board's Recommendation RFR 1.2 (Supplementary Accounting Rules for Groups).

The Parent Company's annual report has been prepared in accordance with Swedish law and through application of the Swedish Financial Reporting Board's Recommendation RFR 2.2 (Accounting for Legal Entities). This implies that the IFRS valuation and disclosure rules are applied, with the exception of the deviations indicated in the section entitled "Parent Company's accounting principles". Both Recommendations RFR 1.2 and 2.2 are to be applied to the presentation of the financial statements that pertain to fiscal years beginning January 1, 2009 or later, although earlier application is encouraged. Munters has decided to apply these Recommendations in the 2008 Annual Report.

1.2 Basis on which the accounts have been prepared

The consolidated accounts are based on historical acquisition values, with the exception of derivative financial instruments.

1.3 Basis of consolidation

The consolidated accounts encompass the Parent Company and its subsidiaries. The financial statements for the Parent Company and its subsidiaries that are included in the consolidated accounts refer to the same period and have been prepared in accordance with the accounting principles that apply to the Group.

All intra-Group transactions, revenues, costs, profits or losses that arise in transactions between companies included in the consolidated accounts have been entirely eliminated.

Subsidiaries Subsidiaries refers to a company in which the Parent Company directly or indirectly holds more than half of the voting rights or otherwise has a controlling influence.

A subsidiary is included in the consolidated accounts as of the time of its acquisition, which is the day when the Parent Company acquires a controlling influence, and is included in the consolidated accounts until the day on which the controlling influence ceases.

Subsidiaries are reported in accordance with the purchase method, entailing that identifiable assets and liabilities in the acquired company are reported at the fair values determined by the purchaser on the acquisition date.

Minority interest The minority interest is the portion of earnings and of net assets of non-wholly owned subsidiaries that accrues to owners other than the Parent Company's owners. The minority share in the company's net earnings is included in the earnings reported in the consolidated accounts and the share in its net assets is included in the equity reported in the consolidated balance sheet.

Associated companies Associated companies refers to companies in which the Parent Company directly or indirectly has a long-term holding corresponding to not less than 20 percent and not more than 50 percent of the voting rights or otherwise holds a significant influence.

Associated companies are reported in accordance with the equity method. This means that the consolidated balance sheet includes the acquisition cost of the shares, plus the Group's share in the earnings of associated companies after acquisition and after deduction of dividends received. The consolidated income statement includes the participation in the earnings of the associated

companies after tax, with deduction, where applicable, of impairments of goodwill and amortization of surplus values.

Translation of the accounts of foreign subsidiaries The subsidiaries' items in the balance sheet are valued in the relevant functional currency, which would normally be identical to the local currency in the particular country. The consolidated financial statements are presented in Swedish kronor, which is the Parent Company's functional currency. The income statement and balance sheets for the foreign subsidiaries are translated into Swedish kronor. The balance sheets are translated at the closing rates of exchange. The income statements are translated at the average exchange rate during the period. Exchange-rate differences do not affect earnings, but are reported directly under equity. The following currency rates have been used in currency translations.

			Average rate		Closing rate of exchange
Currency	Country	2008	2007	2008	2007
AUD	Australia	5.53	5.66	5.36	5.66
CAD	Canada	6.17	6.31	6.30	6.59
CNY	China	0.95	0.89	1.13	0.89
DKK	Denmark	1.29	1.24	1.47	1.27
EUR	Euro	9.61	9.25	10.94	9.47
GBP	United Kingdom	12.09	13.53	11.25	12.91
JPY	Japan	0.064	0.057	0.086	0.057
NOK	Norway	1.17	1.15	1.10	1.19
SGD	Singapore	4.64	4.48	5.38	4.47
THB	Thailand	0.20	0.21	0.22	0.22
USD	USA	6.58	6.76	7.75	6.47
ZAR	South Africa	0.80	0.96	0.82	0.94

1.4 Changed accounting principles for the Group

The applied accounting principles are the same as the principles applied in the preceding year with the exceptions described below. During the year, Munters introduced the following statements from the IFRIC and changes in standards from the IASB as of January 1, 2008. Other changes in standards and statements were not deemed relevant for Munters.

IFRIC 11 IFRS 2 Group and Treasury Share Transactions, including Group-internal The Group has introduced IFRIC 11 to the extent that it is applicable to the consolidated accounts. The interpretation requires that a contract in which an employee is allotted a right to the company's equity instruments is recognized as a share-based payment, even if the company purchases the instrument from an external party or if the shareholders provide the required equity instruments. The Group has updated the accounting principles to comply with this interpretation. The Group has not issued any instruments that are affected by this interpretation.

IFRIC 14 IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction The interpretation addresses the issue of how asset ceilings and lowest funding requirements according to defined-benefit pension plans should be calculated according to IAS 19 Employee Benefits. The Group has updated the accounting principles to comply with this interpretation. The Group's defined-benefit pension plans show deficits, meaning that the application of this interpretation did not affect the Group's financial position or earnings.

IAS 16 Property, Plant and Equipment The concept of "net sales value" is replaced by "fair value less selling costs." The Group has updated the accounting principles to comply with this change, which did not result in any change in the Group's financial position or earnings.

1.4.1 Introduction of new accounting principles

The new standards, interpretations and revisions that must be applied for the 2009 fiscal year or later are presented below. Munters does not intend to apply any of these in advance. Munters has elected only to comment on standards and interpretations that are deemed to be or may become relevant for the Group and its operations.

IFRS 8 Operating Segments This standard contains disclosure requirements regarding the Group's operating segments and replaces the requirement to define primary and secondary segments based on business segments and geographic areas according to IAS 14. Instead, the new standard requires that segment information is presented from management's perspective, meaning that it is presented in the manner used in internal reporting. Munters will report the three divisions MCS, HumiCool and Dehumidification as operating segments. IFRS 8 will be applied for the 2009 fiscal year.

Amendment to IAS 27 Consolidated and Separate Financial Statements The amendment to IAS 27 requires that all dividends from subsidiaries, jointly controlled units or associated companies are recognized in the income statement in the separate financial statements. The amendment must be applied for fiscal years beginning on January 1, 2009 or later and is applied progressively. The new requirements only affect the Parent Company's separate financial statements and have no affect on the consolidated accounts. The Parent Company has no ownership interests in units that entail joint control with another party.

IFRS 3 (Revised) Business Combinations and IAS 27 Consolidated and Separate Financial Statements (Revised) The revised standards must be applied for fiscal years beginning on July 1, 2009 or later. IFRS 3 (Revised) introduces a number of changes in the reporting of business combinations taking place after this date, which will affect the magnitude of recognized goodwill, recognized earnings in the period in which the acquisition takes place and recognition of future earnings.

IAS 27 (Revised) requires that changes in ownership shares in a subsidiary in which the majority owner does not lose the controlling influence are recognized as equity transactions. As a result, these transactions will no longer give rise to goodwill or result in any gains or losses. Furthermore, IAS 27 (Revised) changes the reporting of losses that arise in partially owned subsidiaries, as well as loss of control of a subsidiary. As a result of these amendments, consequential changes were made in IAS 7 Cash Flow Statements, IAS 12 Income Taxes, IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures.

The changes in IFRS 3 (Revised) and IAS 27 (Revised) will affect the reporting of future acquisitions, loss of control and transactions with minority owners. The revised standard may be applied in advance, but the Group does not intend to take advantage of this option.

IAS 1 Presentation of Financial Statements (Revised) The revised standard will apply for the 2009 fiscal year. The standard distinguishes between changes in equity resulting from transactions with owners and other changes. The statement of changes in equity will only contain details relating to owner transactions. Other changes than owner transactions in equity will be presented as a single item in the statement of changes in equity. In addition, the standard introduces the concept of "report of total earnings for the period," which shows all items relating to income and expenses, either in a separate statement or in two related statements. The Group has not yet established whether one or two statements will be used.

IAS 23 Borrowing Costs (Revised) The standard requires capitalization of borrowing costs when they are attributable to assets that necessarily take significant time to complete for the intended use or sale. The revised IAS 23 must be applied for fiscal years starting on January 1, 2009 or later. This revision is expected to affect Munters in conjunction with the establishment of new plants and major expansions of existing plants when financed by borrowing.

Minor amendments and clarifications to existing IFRS The Group has not begun applying the amendments described below, and they are not deemed to have any significant effect on the financial reports.

• IFRS 7 Financial Instruments: Disclosures Elimination of reference to "total interest income" as a component in financial expenses.
• IAS 10 Events After the Reporting Period Clarification that a dividend announced after the closing date does not constitute an obligation.
• IAS 16 Property, Plant and Equipment Tangible fixed assets that are held for leasing and which are subsequently sold as a matter of routine in ongoing operations at the end of the leasing period are transferred to inventory when the lease expires and are held for sale.
• IAS 18 Revenue The term "direct costs" is replaced with the term "transaction costs" to correspond with the definition in IAS 39.
• IAS 19 Employee Benefits The definitions of "costs relating to service during previous periods", "return on managed assets" and "current" and "other long-term" employee benefits were revised. Changes in plans that result in a reduction of benefits in relation to future services are recognized as a reduction, The reference to the obligation to report contingent liabilities in line with IAS 37 was eliminated.
• IAS 20 Accounting for Government Grants and Disclosure of Government Assistance Loans granted in the future at low or no interest will not be exempted from the requirement to recognize implicit interest. The difference between the amount received and the discounted amount will be recognized as a government grant. Furthermore, a number of terms were revised for better agreement with other terms in IFRS.
• IAS 27 Consolidated and Separate Financial Statements When a parent company in the separate financial statements recognizes holdings of subsidiaries at fair value in accordance with IAS 39, the same principle must be applied when the subsidiary is later classified as held for sale.
• IAS 39 Financial Instruments: Recognition and Measurement Certain changes in circumstances with respect to derivatives are not considered as reclassification and, as a result, they can be removed from or included in the category "fair value via the income statement" after the first reporting date. The reference in IAS 39 to "segment" in determining whether an instrument shall be classed as a hedge was eliminated. The amendment requires application of a modified effective interest rate in conjunction with revaluation of debt instruments that are no longer recognized as a fair-value hedge.

1.5 Accounting principles applied

Business combinations IFRS 3 (Business combinations) is applied to acquisitions of operations carried out on or after January 1, 2004, which complies with IFRS 1 and is consequently an exception from the main rule on retroactive application of IFRS.

IFRS 3 implies that the fair value of the identifiable assets and liabilities of the acquired operations is established at the time of acquisition. These fair values also include participations in the assets and liabilities attributable to any remaining minority owners of the acquired operations. Identifiable assets and liabilities also include assets, liabilities and provisions, including commitments and claims from external parties that are not reported in the balance sheet of the acquired operations. Provisions are not made for expenses concerning projected restructuring measures resulting from the acquisition. The difference between the acquisition value of the acquisition and the acquired share in the fair value of the net assets of the acquired operations is classified as goodwill and reported in the balance sheet.

The useful life of each intangible asset is established and amortized over the period of useful life. If the useful life is deemed indefinite, no impairment takes place. An assessment that causes the useful life of an intangible asset to become indefinite takes all relevant circumstances into account and is based on the premise that there is no predictable maximum time limit for the net cash flow generated by the asset. The useful life of goodwill is generally assumed to be indefinite.

Fixed assets Fixed assets are reported on the balance sheet at acquisition value less accumulated depreciation according to plan and any applicable impairments. The assets of acquired companies are reported at fair value on the date of acquisition with deduction of accumulated depreciation.

The acquisition value of the asset is depreciated according to the straight-line method down to the estimated residual value over the expected useful life of the asset. Anticipated useful lives are specified in Note 7. The assets' remaining useful life is reviewed on every closing date and is adjusted if necessary.

Buildings, machinery and equipment Land is not subject to depreciation since it is considered to have an indefinite useful life.

Normal maintenance and repair costs are expensed as they arise. More extensive renovation and upgrade costs are reported as an asset and depreciated over the remaining useful life of the object.

Goodwill Goodwill is the value by which the acquisition price exceeds the fair value of the net assets acquired in conjunction with the acquisition of a company or an acquisition of assets and liabilities. Goodwill arising from the acquisition of associated companies is included in the carrying amount of the associated company. Patents, licenses and similar intangible rights Direct external expenses for the development of software for internal administrative use are capitalized, provided future efficiency gains are likely and exceed the expenses committed. Activities during the preliminary study phase, and maintenance and training costs, are expensed on a regular basis.

Impairment testing When there is an indication that an asset's value has declined, the carrying amount of the asset is assessed. Goodwill and other intangible assets with an indefinite useful life are impairment-tested at least once a year.

If an asset's carrying amount exceeds its estimated recoverable amount, the asset is impaired to its recoverable amount. The recoverable amount is the higher of net sale value and value in use. The recoverable amount is assessed for each cash-generating unit individually.

"Net sale value" refers to the most likely sale price in a normally functioning market, with deduction of selling costs. "Value in use" refers to the present value of the estimated future cash flows that are expected to result from the use of the asset and the estimated residual value at the end of the asset's useful life.

Value in use is generally measured using discounted cash-flow models, which requires assumptions of such parameters as a discount rate, future cash flows and the expenses necessary to create the assessed cash flows.

Any previously reported impairment is reversed if the recoverable amount is considered to exceed the carrying amount. No reversal occurs of an amount greater than what would cause the carrying amount to correspond to what it would have been if no impairment had been recognized in a prior period.

Goodwill is impairment tested using the following method. The goodwill value established on the date of acquisition is distributed among cash-generating units or groups of cash-generating units, which are expected to contribute advantages from synergistic effects resulting from the acquisition. Assets and liabilities already in the Group at the time of acquisition can be assigned to these cash-generating units. Each such cash flow to which goodwill is distributed corresponds to the lowest level of the Group at which goodwill is monitored in the management of the Company. This is a unit of the Group that is not larger than a segment – that is, a division or geographic region in the Group's segment reporting. Goodwill impairment is not reversed.

Inventories Inventory is valued at the lower of acquisition cost or net sales value (fair value). Required impairments are made for obsolescence based on each item's age and inventory turnover rate. Acquisition value is determined by applying the first-in, first-out method or weighted average prices, if that method results in a good approximation of the first-in, first-out method. For internally manufactured products, the acquisition value consists of direct manufacturing costs plus a reasonable share of indirect manufacturing costs. Interest expenses are not included in inventories. Normal capacity utilization has been taken into account in valuations.

Work in progress on behalf of another party Work in progress consists of committed expenses attributable to currently incomplete work.

Cash and cash equivalents Cash and cash equivalents are defined as cash and bank balances plus current investments with maturity periods not exceeding three months. Utilized overdraft facilities are reported under short-term loans.

Equity Expenses for the purchase of treasury shares reduce equity in both the Parent Company and the Group. When these shares are sold, the proceeds of the sale are included in equity.

Provisions Provisions are reported when the Group has or may be considered to have an obligation as a result of events that have occurred and where it is probable that payment will be required to fulfill the obligation. An additional prerequisite is that it must be possible to reliably estimate the amount to be paid.

A provision is made for restructuring measures when a detailed, formal plan of the measures exists and well-founded expectations have been created among those who will be affected by the measures.

Employee benefits Within the Group, there are several definedcontribution plans and several defined-benefit plans and other longterm employee benefits, including some with management assets in special trusts or the equivalent. In defined-contribution plans, the company pays a pre-determined premium to a separate legal entity and does not have any legal or informal obligation to make additional payments, if the legal entity should prove to have insufficient assets when compensation to the employee is to be paid. All other plans for benefits when employment ends are defined-benefit plans. Pension plans are mainly funded through premiums paid by the various Group companies. Independent actuaries compute the amount of the commitments of the various plans and reassess pension plan commitments every year.

Regarding defined-benefit plans, pension costs are calculated using the Projected Unit Credit Method, so that the cost is distributed over the employee's working life. These commitments are valued at the present value of the anticipated future payments calculated using a discount rate that corresponds to the interest on high-quality commercial paper or government bonds with a remaining term that approximately corresponds to that of the commitments. For funded plans, the pension commitment is reported net after deduction of the plan assets. Actuarial gains and losses are reported against equity, net after deferred tax, in the period they occurred.

In Sweden, special employers' contributions pertaining to actuarial gains/losses are reported in equity.

The Group's payments relating to defined-contribution plans are reported as an expense during the period the employee performed the services to which the contribution relates.

Other long-term employee benefits include benefits in conjunction with anniversaries or other benefits to long-term employees. Recognition of these benefits differs from defined-benefit plans whereby actuarial gains and losses are recognized in the income statement and all expenses pertaining to employment during previous periods are recognized immediately.

Stock options program Employees have paid a market premium for the stock options program that Munters has implemented (see Note 29). The stock option programs contain a subsidy implying that the employee receives the equivalent of 60 percent of the option premium in the form of a cash bonus, provided the option holder is employed during the period when the options may be exercised. This subsidy and the related social security payments are calculated and allocated as a personnel cost over the vesting period – that is, from the time of issuance of the options until the vesting conditions have been fulfilled.

Warranty commitments Warranty costs are reported as cost of goods sold. Provisions for warranty costs are calculated at a standard rate in an amount that corresponds to average warranty costs in relation to sales in the most recent 24-month period, with an adjustment for known warranty claims exceeding the standard provision. Provisions for warranty commitments are related to the stated warranty period.

Leasing Leases are classified either as financial or operating leases. Leases in which Munters adopts essentially the same legal position as in direct ownership of the asset are classified as financial leases. Reporting of financial leases entails recognizing a fixed asset as an asset item in the balance sheet, at the lower of the market value of the asset and the estimated present value of the underlying lease payments, and initially reporting a corresponding liability. The asset is depreciated according to plan over its useful life, while the lease payments are reported as interest and amortization of the liability. For operating lease, the lease payments are expensed in the income statement over the lease period.

Revenue Net sales are reported at the sale value after deduction of discounts and value added tax and other taxes.

Income from the sale of goods is reported upon delivery, at which point essentially all risks and rights are transferred to the purchaser. This normally implies that sales are reported on delivery to the customer in accordance with the conditions of sale.

Income from major project assignments is reported in relation to the degree of completion on the closing date, provided the profit can be reliably calculated. Degree of completion is determined mainly on the basis of committed project costs in relation

to estimated project costs upon completion. Any expected losses are expensed directly.

In the MCS division, there are numerous small projects with short completion periods (the average being between two and 12 weeks). For practical reasons, income from such projects is reported on completion in connection with the issuing of a final invoice to the customer.

Key categories of revenue are defined in Note 5, whereby Dehumidification and HumiCool refer to the sale of goods and MCS refers to services rendered.

Interest income on receivables is calculated using the effective interest method. Interest income includes the accrued amount of transaction costs and possible discounts, premiums and other differences between the original value of the receivable and the amount received when due.

Research and development costs The Group's expenses for research are expensed as they are incurred. Under certain circumstances, development costs can be capitalized, but this requires, among other things, that future economic benefits can be shown at the time when the costs arise. There is currently no such project, and development costs are therefore also expensed as they arise.

Borrowing costs Borrowing costs are reported as costs in the period in which they arise, regardless of how the borrowed funds are employed.

Government grants Government grants are reported at fair value when it may be presumed with reasonable certainty that a grant will be received and that the Group will fulfill all the conditions attached thereto.

Government grants related to the acquisition of assets are reported in the balance sheet through the reduction by the grant of the carrying amount of the asset. Government grants attributable to costs are reported as deferred income and recognized as revenue as the costs that the grant is designed to offset arise. When a government grant is attributable neither to the acquisition of assets nor to remuneration of costs, it is reported as other income.

Transactions in foreign currency Transactions in foreign currency are translated at the exchange rate on the transaction date. Monetary assets and liabilities in foreign currencies are translated at the closing rate of exchange and any resulting translation differences are reported to earnings. Accordingly, both realized and unrealized exchange-rate differences are reported in the income statement. Exchange-rate differences concerning operating receivables and liabilities are reported under operating earnings, while exchange-rate differences attributable to financial assets and liabilities are reported as a financial expense.

Financial instruments Financial instruments are all forms of contract that give rise to a financial asset in one company and a financial liability or an equity instrument in another company.

Classification of financial instruments is in the following categories: (a) financial instruments valued at fair value via the income statement, (b) loan or accounts receivables, (c) financial instruments held until maturity, (d) financial instruments available for sale and (e) other financial liabilities. Classification depends on the objective in acquiring the instrument. Management establishes the classification of the instruments when first reported and reassesses this decision on every reporting date. All financial instruments are recognized from the transaction date.

Classification of financial assets and liabilities

(a) Financial instruments valued at fair value via the income statement This category has two sub-groups: financial assets held for trade and such assets as are initially classified as valued at fair value via the income statement. A financial asset is classed in this category if it was acquired primarily with the intention to sell it shortly or if this classification was determined by management. Derivative instruments are also classified as held for trade, if they are not identified as hedges. Assets in this category are classed as current assets either if they are held for trade or expected to be realized within 12 months from the balance-sheet date. Munters has financial assets classified in this category.

• (b) Loan and accounts receivable Loan and accounts receivable are non-derivative financial assets with determined or determinable payments that are not listed on an active market. Characteristic for these assets is that they arise when the Group provides money, goods or services directly to a customer without the intention to trade the receivable thus arising. They are included in current assets with the exception of items with due dates more than 12 months after the balance-sheet date, which are classified as fixed assets. Munters has cash and cash equivalents, accounts receivable, accrued income and certain other receivables in this category.
• (c) Financial assets held to maturity Financial assets that are held until maturity are non-derivative financial assets with determined or determinable payments and a fixed period that Group management intends and has the ability to hold until maturity. Munters has no financial instruments in this category.
• (d) Financial assets available for sale Financial assets not classified in any other category, such as shares and participations in both listed and unlisted companies. Munters has no financial instruments in this category.
• (e) Other financial liabilities Financial liabilities that are not held for trade. Munters' borrowing, accounts payable and certain accrued expenses are included in this category.

Recognition and valuation of financial instruments Loan and accounts receivable are initially valued at fair value. In establishing fair value, information is used as applicable relating to recently completed arm's length transactions, other approximately equivalent instruments and an analysis of discounted cash flows. On subsequent occasions, the assets are valued at accrued acquisition value based on the effective-interest method and adjusted for any credit losses. A provision for credit losses is allocated when there are strong indications that the Group will not be able to receive the amounts specified according to the receivables' original terms.

Other financial liabilities are recognized at accrued acquisition value based on the effective-interest method. The acquisition value corresponds to the fair value on the acquisition date. For borrowing, this corresponds to the amount received reduced by any transaction costs.

Any gains and losses arising in conjunction with disposal of financial instruments or repurchase of loan obligations are recognized in the income statement.

Offsetting of financial instruments Financial assets and liabilities may be offset against each other and recognized in net amounts in the consolidated accounts in cases where Munters has agreed with the counterparty that assets and liabilities will be settled in net amounts.

Financial derivative instruments Financial derivatives are initially recognized at acquisition value in the balance sheet and thereafter at current market value on subsequent balance-sheet dates. The method for recognition of gains and losses thus arising varies, depending on the character of the risk-hedged interest.

When a derivative contract is entered, it is classed as either (1) hedging of fair value of a recognized asset or liability (fair-value hedging), (2) hedging of a planned transaction or a definitive obligation (cash-flow hedging), (3) hedging of a net investment in a foreign subsidiary or (4) as a derivative that does not meet the requirements for hedge accounting.

Changes in the market value of such derivatives that are classified as, and meet the requirements for, fair-value hedging that can be determined objectively, are recognized in the income statement together with any changes in market value of the liability to which the hedge applies. Munters does not apply fair-value hedging.

Changes in fair value of such derivatives that are classified as, and meet the requirements for, cash-flow hedging that can be determined objectively, are recognized in equity as a hedging reserve up until the date on which the hedged interest is reported. When the hedged interest is recognized, income or expense arising from the associated derivative is also recognized under financial items in the income statement. If a planned transaction or an assumed obligation is no longer expected to occur, any gain or loss thus far charged against equity is immediately transferred to the income statement. Munters applies cash-flow hedging to a limited extent.

Certain derivative transactions do not meet the requirements for hedge accounting according to IAS 39 (Financial Instruments: Recognition and Valuation), although they are financially motivated according to the Group's risk management policy. Changes in market value for such non-qualified hedging transactions are immediately recognized in the income statement. This type of transaction does not occur in the Group.

Munters hedges major investments in foreign subsidiaries. Changes in value for hedges relating to net investments in foreign subsidiaries are recognized in equity as they arise. Accumulated changes in value are retained in equity until the operation is divested, at which time the changes in value are recognized in the income statement.

Accumulated translation differences Translation differences relating to investments in foreign operations are recognized as a translation reserve in equity. In conjunction with the sale of foreign operations, accumulated translation differences must be reported as part of the consolidated gain/loss from the divestment. Munters has elected to set accumulated translation differences at zero as per January 1, 2004, in accordance with the transition rules in IFRS 1.

Income taxes Income taxes in the consolidated financial statements consist of current and deferred income tax.

Current income taxes are based on each company's taxable income as reported in its tax return for the year. This includes an adjustment for current income tax attributable to previous periods.

Deferred income tax is calculated to correspond to the tax effect that arises when final tax is triggered. It is based on temporary differences between carrying amounts in the balance sheet and residual values for tax purposes. The amounts are calculated using the tax rates that were effective or had been announced on the closing date. Temporary differences arise in conjunction with company acquisitions as the difference between the value of assets and liabilities in the consolidated balance sheet and their value for tax purposes.

Deferred tax assets relating to loss carryforwards are reported to the extent that it is deemed likely that loss carryforwards will be used to offset future surpluses.

Deferred tax liabilities referring to temporary differences attributable to investments in subsidiaries and associated companies are not reported, since in all such cases, the Parent Company can control the time of the reversal of the temporary differences, a capital gain/loss on a sale is not subject to taxation and it is considered unlikely that a reversal will occur in the near future.

Contingent liabilities Contingent liabilities are reported when there are possible obligations relating to transpired events that will only become actual obligations given the occurrence or non-occurrence of one or more uncertain future events that are completely outside the control of Munters. Contingent liabilities may also be an obligation arising from transpired events but which is not reported as a liability or a provision because it is not prob

able that the obligation will be settled or because the settlement amount cannot be calculated with sufficient reliability

Information concerning related parties Companies related to Munters include the Parent Company, subsidiaries and associated companies. "Related physical persons" are defined as Board members, senior management and close family members of such persons.

Information on transactions with related parties that entail a transfer of resources, services or obligations between related parties is disclosed, regardless of whether remuneration was paid or not. The disclosure contains information as to the character of the relationship and the effect of the relationship on the financial statements.

Events after the closing date If events arise that are significant, but that should not be taken into account when the amounts in the income statement and balance sheet are established, information will be provided in the Board of Directors' Report and notes as to the character of the event and, if possible, an estimate of its financial effect. The term "significant" implies that a disclosure of the information could influence financial decisions made by users of the financial statements.

Significant events that confirm the relationship that existed on the closing date and that occur after the closing date but prior to the signing of the Annual Report result in adjustments in the amounts in the Annual Report.

Accounting principles of the Parent Company The Parent Company has prepared its annual accounts in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's Recommendation RFR 2.2 Accounting for Legal Entities. This means that IFRS is applied with the deviations and amendments presented below.

Pensions The Parent Company's pension commitments are calculated and reported based on the law on safeguarding of pension commitments, which deviates from IAS 19. The principles from accounting based on this law are found in FAR SRS's accounting Recommendation No 4 Accounting of Pension Liabilities and Pension Costs, RedR 4. Application of the law on safeguarding of pension commitments is a prerequisite for the right to tax deductions. Actuarial gains and losses are recognized in the income statement.

Financial instruments Recognition and Measurement The Parent Company does not apply IAS 39.

Financial Instruments Recognition and Measurement, instead measurements are based on the acquisition value of assets and liabilities.

Ownership of subsidiaries Ownership shares in subsidiaries are reported in the Parent Company according to the purchase method. Received dividends are only recognized as income subject to the condition that they are attributable to profits earned after the acquisition date.

Group contributions and shareholders' contributions The Parent Company reports Group contributions and shareholders' contributions in accordance with the Statement from the Swedish Financial Reporting Board (UFR).

UFR2 Group contributions and shareholders' contributions Shareholders' contributions are reported directly against the receiver's equity and capitalized in the shares and participations of the provider, to the extent that impairment is not required. Group contributions are reported according to financial significance. This means that Group contributions that are made to minimize the Group's total tax are reported directly against profit brought forward after deductions of current tax effects.

Untaxed reserves The amounts for which provisions have been made to untaxed reserves comprise taxable temporary differences. Due to the connection between accounting and taxation, the deferred tax liabilities attributable to the untaxed reserves in the Parent Company are not reported separately in the legal entity.

NOTE 2 Significant estimations and assessments

In preparing the financial reports, Group management and the Board of Directors make assessments and assumptions that affect the financial statements and the information presented. These assessments are based on past experience and the various assumptions that management and the Board consider reasonable under the prevailing circumstances. The conclusions thus drawn form the basis for determinations concerning carrying amounts of assets and liabilities in cases where they cannot be readily determined from information from other sources. The actual outcome may differ from these assessments, if other assumptions are made or other conditions apply.

The estimates and assumption that are considered to have the greatest impact on Munters' earnings and financial position are discussed below.

Doubtful accounts receivable

Accounts receivable are recognized in net amounts after reserves for possible loss risks. The net value reflects the amount that it is expected to be possible to recover, based on circumstances known on the balance-sheet date. Changes in circumstances, such as an increase in missed payments or a change in the financial position of a significant customer, may result in significant deviations in the valuation.

Valuation of goodwill

The Group assesses the need for an impairment of goodwill each year. This assessment requires an estimation of parameters that affect future cash flow and determination of a discount rate. Thereafter, the recovery value of each individual cash-generating unit is established by calculating the value in use. Future cash flow for some goodwill items was particularly difficult to assess, given the macroeconomic situation at the end of 2008 and its effects on the coming year. Note 14 presents the significant assumptions made in assessing goodwill and describes the effects of reasonable and possible changes in the assumptions on which the calculations were based.

Acquired intangible assets

In conjunction with company acquisitions, the acquired intangible assets are valued at fair value. In cases where there is an active market for the acquired assets, the fair value is determined on the basis of prices in that market. Because active markets are often lacking for these assets, valuation methods have been developed to estimate fair values. One example of a valuation model is discounted future cash flows.

Restructuring measures

Restructuring costs include the necessary impairment of assets, as well as estimated costs for dismissal of personnel. The cost calculation is based on detailed action plans that are expected to improve the Group's cost structure and productivity. To minimize uncertainty factors, historical outcomes from similar events are normally used as the basis for the calculation. Provisions for restructuring measures are allocated when a detailed, formal plan for the measures is established, and well-founded expectations have been created among those who will be affected by the measures.

Provisions for pensions

The pension liabilities recognized in the balance sheet are actuarial calculations based on assumptions about the discount rate, inflation, future salary increases and demographic factors. These assumptions are updated each year, which affects the magnitude of the recognized pension liability and equity. The prevailing situation in the financial markets contributed to increased uncertainty in determining the discount rate for 2008. Together with assumptions on anticipated returns on managed assets, these assumptions affect the pension costs recognized for the year. Additional information is presented in Note 21.

Legal disputes

Provisions for legal disputes are estimates of the future cash flow that will be required to settle the obligations. The disputes primarily relate to contracted obligations attributable to contracts with customers and suppliers, although other types of disputes also arise in normal business operations. Management considers it improbable that any of the known disputes in which Munters is presently involved will have a significant effect on the Group's accounts.

Other provisions

Several of Munters' products are covered by guarantees that apply during a predetermined fixed period. Provisions for such product guarantees are based on historical data and expected costs for quality problems that are known and can be anticipated.

NOTE 3 Financial risk management

In its business, Munters is exposed to several different financial risks: market risk (primarily currency and interest risk), credit risk and liquidity risk.

The financial risks are controlled and managed based on a policy adopted by the Board of Directors that is intended to limit the financial risks to which Munters is exposed through preventative measures. The policy also regulates the division of responsibility between the Group's subsidiaries and the central finance function. Risk management and financing operations are mainly centralized to the Parent Company in Sweden. The policy has been unchanged in 2008.

Information about financial risks is provided in Note 18.

Market risk

Currency risk

Munters conducts operations in countries all over the world. The Group is thus exposed to currency risks in both transactions in foreign currency and when translating income statements and balance sheets to SEK.

A significant share of Munters' sales and costs are generated in foreign currencies. The geographic distribution of Munters' production plants results in significant matching of revenues and costs in local currencies, which limits currency exposure. The shares of net sales and costs for the most significant currencies during the year are shown below.

2008

Currency	Proportion of sales, %	Proportion of costs, %
EUR	36.4	36.3
USD	31.0	29.6
NOK	7.2	7.3
GBP	5.1	5.0
SEK	5.1	8.6
Other currencies	15.2	13.2
Total	100.0	100.0

Currency	Proportion of sales, %	Proportion of costs, %
EUR	35.8	35.3
USD	31.6	30.5
NOK	6.8	7.0
GBP	7.2	6.5
SEK	4.2	8.7
Other currencies	14.4	12.0
Total	100.0	100.0

Munters' sensitivity to variations in the currencies most significant for earnings is presented in the table below. The analysis includes both transaction and translation exposure and is based on operating earnings for 2008 and 2007, respectively. The assumption is that all other factors that can influence earnings are unchanged.

2008	Estimated effect on operating earnings
SEK +10% compared with	SEK M	%
EUR	–12.4	–4.0
USD	–18.9	–6.1
NOK	–1.8	–0.6
GBP	–2.4	–0.8
AUD	–0.8	–0.2
JPY	–1.6	–0.5

2007	Estimated effect on operating earnings
SEK +10% compared with	SEK M	%
EUR	–23.2	–4.8
USD	–24.0	–4.9
NOK	–2.8	–0.6
GBP	–8.1	–1.7
AUD	–1.6	–0.3
JPY	–1.9	–0.4

Transaction exposure

Munters hedges 100 percent of net contracted operative and financial flows in foreign currency. Sales in foreign currencies take place primarily in internal Group sales companies, meaning that hedging can be concentrated to fewer companies within the Group. Hedging takes place primarily through the sale of currency in forward contracts and through external borrowing in foreign currency. The value of currency hedging at year-end amounted to slightly more than SEK 1 M, see Note 18. According to Munters' financial policy, hedging through currency options may only take place in exceptional cases. There were no currency options at the end of 2008.

Translation exposure

Munters' exposure to translation risk arises because a large number of its subsidiaries have a functional currency that is different than the Group's reporting currency. Munters hedges the currency risk attributable to the translation of income statements and balance sheets in EUR and USD.

The total effect of translating 2007 operating earnings to 2008 exchange rates resulted in an expense of SEK –3.5 M (expense –16), corresponding to 1.0 percent (2.9) of the year's operating earnings. The effect on equity of translation of foreign subsidiaries' net assets to SEK amounted to SEK 137 M (10) during the year.

Interest risk

Since the Group does not have any significant interest-bearing assets, the Group's income and cash flow from current operations is essentially independent of changes in interest rates. However, the Group is exposed to interest risk through interest-bearing borrowing, which is one of the Group's sources of financing in addition to equity and cash flow from current operations.

According to the guidelines specified in Munters' financial policy, the interest period for debt should normally be between 0 and 12 months. The average interest period at year-end 2008 was slightly more than four months. A specification of the Group's interest-bearing debt is provided under the heading Liquidity risk.

Interest exposure

The estimated effect on earnings after financial items of a change in interest levels of 1 percent amounts to slightly more than SEK 9 M (7), primarily as an effect of borrowing with variable interest.

Credit risk

For Munters, the dominant portion of credit risk relates to accounts receivable. Munters works actively to limit this risk. An approved credit rating is required in order for a counterparty to be approved. Advance payment is generally encouraged, and partial advance payment is a requirement when the order value is a significant amount and delivery extends over a long period. Accounts receivable are also spread over a large number of customers, primarily companies in different industries and with substantial geographic diversity, which limits concentration of the credit risk. During the year, the Group's five largest customers accounted for 8 percent of total revenue.

To ensure that the Group's accounts receivables are paid, Munters developed a new policy during 2008 in a joint Group improvement project. According to this policy, each business unit must have established and documented processes for handling unpaid receivables. The documented processes include specifications for time limits for taking various actions, including legal actions, as well as for who is responsible at various stages of the process. Documentation of actions taken ensures that follow-ups will be possible. The measures are matched to amounts and to different groups of customers and business areas in a manner that will result in efficient handling of overdue accounts receivable.

Time analysis of accounts receivables overdue but not written down

Amount at year-end	457	562
> 180 days	4	59
91–180 days	49	83
30–90 days	150	172
< 30 days	254	248
	2008	2007

Collateral in the amount of SEK 108 M has been provided for total receivables, of which SEK 106 M comprises bank guarantees.

Provisions for bad debts correspond to 8.0 percent (5.5) of total receivables and changed according to the following.

Provisions for bad debts

	2008	2007
Provisions at January 1	75	67
Acquisitions of subsidiaries (Note 4)	–	2
Provisions for anticipated losses	77	22
Established losses	–38	–7
Reversals of unutilized provisions	–13	–12
Exchange-rate differences	14	2
Amount on December 31	115	75

The credit risk for other financial assets, such as cash and cash equivalents, amounted to the carrying value of these assets.

Liquidity risk

Munters' borrowing from banks consists in part of a syndicated credit facility and in part of individually approved bank loans to subsidiaries, often in conjunction with acquisitions of operations. The syndicated credit facility amounts to SEK 2,000 M and extends until 2012. The facility may be utilized in several currencies.

Interest-bearing debt amounted to SEK 1,694 M at year end (1,200) and was distributed as follows. Note 20 also provides information.

Interest-bearing debt		Group
	2008	2007
Bank loans – approved general credit
framework	2,190	2,177
Bank loans – unutilized portion	–545	–1,019
Bank loans – in addition to general
credit framework	34	32
Leasing commitments	15	10
	1,694	1,200

Borrowing is distributed among local currencies with average weighted interest rates as follows:

Currency	Nominal amount, millions	Average interest rate, %
SEK	320	3.5
EUR	81	4.0
USD	57	2.3
CNY	20	5.1
DKK	5	6.1

Calculation of net debt is reported in the cash-flow statement.

Munters' syndicated credit facility means that the Group is subject to external capital requirements that stipulate limits for net debt through profit before interest expenses, tax and impairments and the interest coverage ratio. The Group has complied with the external capital requirements. Munters has established routines for managing external borrowing and following up the limits in the capital requirements. In this manner, the Group ensures that it fulfills its commitments to external lenders and minimizes the liquidity risk. External borrowing is managed centrally by the Parent Company in Sweden. The financial policy adopted by the Board of Directors regulates levels with respect to cash and cash equivalents and credit facilities in relation to sales. When surplus liquidity arises in the Group, it is primarily used to amortize external loans.

The tables below show the remaining contract periods until maturity. The amounts specified in the table are the contracted, non-discounted cash flows. The difference from the recognized amounts in the balance sheet relate to leasing commitments, which in this presentation are reported gross before deduction of interest and fees.

December 31, 2008	< 1 year	1–5 years	> 5 years	Total
Interest-bearing liabilities	39	1,653	–	1,692
Other liabilities	619	6	1	626
Accounts payable	537	–	–	537
	1,195	1,659	1	2,855
December 31, 2007	< 1 year	1–5 years	> 5 years	Total
Interest-bearing liabilities	29	31	1,137	1,197
Other liabilities	403	86	–	489
Accounts payable	496	–	–	496

Capital management

The Group's management of capital is regulated by a policy adopted by the Board of Directors that entails minimizing surpluses in cash and cash equivalents through amortization of external loans. Surplus liquidity is invested in government bonds with low risk or placed in bank accounts. Surplus liquidity in subsidiaries shall be placed with the Parent Company.

Munters is subject to external capital requirements in the syndicated credit agreement that was entered in 2007. The general implications of these capital requirements are presented under the heading Liquidity risk.

Munters' managed capital consist of equity amounting to SEK 1,285 M (1,202). Munters' intention is to apply a dividend policy that the dividend level is matched to Munters' earnings level, financial position and other factors that the Board of Directors considers relevant against the background of the Group's strategy and in consideration of the prevailing market and business conditions. The annual dividend shall consist of about half of the Group's average net earnings measured over a period of several years. The dividends for the years 2006 and 2007 and the proposed dividend for 2008 correspond to 43 percent of average earnings for the three years.

NOTE 4 Business combinations

Toussaint Nyssenne

As of October 30, 2008, Munters AB acquired 100 percent of the Belgian company Ateliers Toussaint Nyssenne SA, including its French subsidiary Toussaint Nyssenne International (T.N.I.) SA. Toussaint Nyssenne manufactures high-quality customized air treatment systems for offices, public buildings and industrial applications. Its systems are very flexible and modular and provide air treatment for a broad selection of demanding applications. The company was consolidated as of October 1, 2008, which was when the controlling influence was acquired. The acquired operations contributed revenues of SEK 54 M and operating earnings of SEK 3.5 M for the period from October 1, 2008 until December 31, 2008. If the acquisition had taken place on January 1, 2008, the company would have contributed revenues of SEK 193 M with operating earnings of slightly less than SEK 7 M.

Preliminary information about the acquired net assets and goodwill on the acquisition date is provided below.

Purchase price

– cash purchase price paid	75
– fees directly attributable to the acquisition	4
Total purchase price paid	79
Additional purchase price – estimated	2
Total acquisition cost	81
Fair value of acquired net assets	–48
Goodwill (Note 14)	33

Goodwill is attributable to anticipated future synergies and expansion opportunities within product integration, technology and distribution in the European market.

The acquired company's preliminary net assets on the acquisition date:

	Carrying value	Fair value adjustment	Fair value
Tangible fixed assets	7	0	7
Intangible assets – customer
relations and brand (Note 13)	0	18	18
Current assets	24	0	24
Non-interest-bearing receivables	67	0	67
Cash and cash equivalents	14	0	14
Interest-bearing liabilities	–13	0	–13
Non-interest-bearing liabilities
(incl. deferred tax liabilities)	–63	–6	–69
Net identifiable assets and liabilities	36	12	48
Cash purchase price paid plus fees
directly attributable to the acquisition		79
Cash and cash equivalents in the ac
quired company		–14
Change in the Group's cash and
cash equivalents on acquisition		65

The distribution of acquisition values has not been finally determined because the final negotiations with the sellers had not been completed on December 31, 2008.

Munters-Form

As of April 30, 2008, 80 percent of the Turkish company Munters-Form Endüstri Systemleri Sanayi ve Ticaret A.S. was acquired. Munters Form is primarily active in the areas of dehumidification, ventilation products for the agricultural sector and pre-coolers for gas turbines. The company was consolidated as of May 1, 2008, The acquired operations contributed revenues of SEK 37 M and operating earnings of SEK 5 M for the period from May 1, 2008 to December 31, 2008. If the acquisition had taken place on January 1, 2008, the company would have contributed revenues of SEK 46 M with operating earnings of SEK 6 M.

Information about the acquired net assets and goodwill on the acquisition date is provided below.

Purchase price

– cash purchase price paid	21
– fees directly attributable to the acquisition	2
Total purchase price paid	23
Additional purchase price – estimated	7
Total acquisition cost	30
Fair value of acquired net assets	–6
Minority share	1
Goodwill (Note 14)	25

Goodwill is attributable to anticipated future synergies and expansion opportunities primarily within distribution in the region and neighboring countries.

The acquired company's net assets on the acquisition date:

	Carrying value	Fair value adjustment	Fair value
Intangible assets – customer relations (Note 13)	0	5	5
Current assets	5	0	5
Non-interest-bearing receivables	4	0	4
Cash and cash equivalents	2	0	2
Non-interest-bearing liabilities (incl. deferred tax liabilities)	–9	–1	–10
Net identifiable assets and liabilities	2	4	6
Change in the Group's cash and cash equivalents on acquisition		21

Des Champs Technologies

The US company Des Champs Technologies was acquired on April 4, 2007. Munters acquired 100 percent of the shares in Entrodyne Corporation, which is Des Champs' holding company. The company holds a technology-leading position in energy-efficient air treatment solutions and principally manufactures custom air treatment equipment for commercial buildings. The company was consolidated from April 2007. The acquired operations contributed revenues of SEK 196 M for the period April 1, 2007 to December 31, 2007. If the acquisition had occurred on January 1, 2007, the company would have contributed SEK 245 M in revenues for the Group in the preceding year.

Information about the acquired net assets and goodwill is listed below:

Purchase price

Goodwill (Note 14)	171
Fair value of acquired net assets	–57
Total acquisition cost	228
– fees directly attributable to the acquisition	3
– cash purchase price paid	225

The acquisition price for the company was SEK 254 M, of which SEK 29 M pertained to payments to options holders that were settled by Des Champs Technologies prior to the acquisition. Goodwill is attributable to estimated future synergies through product integration, technology and distribution. In addition to synergy effects, the company's expertise in heat-exchanger technology and the company's future earning capacity represent components in the goodwill item.

The acquired company's net assets on the date of acquisition:

	Carrying value	Fair value adjustment	Fair value
Tangible fixed assets	13	0	13
Intangible assets – brands and technol ogy (note 13)	0	48	48
Non-interest-bearing receivables	85	0	85
Cash and cash equivalents	5	0	5
Interest-bearing liabilities	0	0	0
Non-interest-bearing liabilities (incl. deferred tax liabilities)	–75	–19	–94
Net identifiable assets and liabilities	28	29	57
Changes in the Group's cash and cash equivalents at acquisition		223

Turbovent

The Danish companies Turbovent Agro A/S and Turbovent Environment A/S were acquired on July 1, 2007. Munters acquired 100 percent of both of the companies. Turbovent primarily manufactures ventilation equipment for poultry, pigs and cattle in Scandinavia, Germany and Eastern Europe. Turbovent is also in the forefront of air-cleaning and odor-removal solutions for the agricultural industry. The companies were consolidated from July 2007. The acquired operations contributed revenues of SEK 58 M for the period July 1, 2007 to December 31, 2007. If the acquisition had occurred on January 1, 2007, the companies would have contributed SEK 100 M in revenues for the Group in the preceding year.

Information about the acquired net assets and goodwill is listed below:

Purchase price

– cash purchase price paid	80
– fees directly attributable to the acquisition	2
Purchase price paid	82
Additional purchase price – estimated	3
Total acquisition cost	85
Fair value of acquired net assets	–14
Goodwill (Note 14)	71

The additional purchase price pertains to estimated future royalties and product-development subsidies to the seller. Goodwill is attributable to estimated future synergies in product integration. In 2008, goodwill was reduced by SEK 1 M as a result of an adjustment of the purchase consideration following negotiations with the seller.

The acquired company's net assets on the date of acquisition:

	Carrying value	Fair value adjustment	Fair value
Tangible fixed assets	4	0	4
Intangible assets – brands and technology (note 13)	0	7	7
Non-interest-bearing receivables	28	0	28
Cash and cash equivalents	1	0	1
Interest-bearing liabilities	–2	0	–2
Non-interest-bearing liabilities (incl. deferred tax liabilities)	–21	–3	–24
Net identifiable assets and liabilities	10	4	14

Changes in the Group's cash and cash equivalents at acquisition 82

NOTE 5 Segment reporting

Munters is a global leader in energy-efficient air treatment solutions and restoration services based on expertise in humidity and climate-control technologies.

Divisions

The Group's operations are managed and reported per division as described below.

The Dehumidification division manufactures and markets products and complete solutions for controlling humidity and improving the indoor climate. The customers' manufacturing processes and warehousing become more efficient, and product quality, shelf life and hygiene are improved.

The HumiCool division manufactures and markets products and systems for evaporative cooling, heating and humidification for the AgHort industry, as well as technology for mist elimination, in part for cleaning of flue gas.

The MCS division provides service for water and fire damage restoration and temporary climate control. Its comprehensive service offering to the insurance industry results in lower costs through dehumidification and restoration instead of rebuilding.

Division consolidation is performed according to the same principles as for the Group as a whole. Transactions between divisions are on market terms. No income statement items or earnings are allocated to the divisions. Revenues from the largest customer in the Dehumidification division correspond to about SEK 140 M of the segment's total revenues. Revenues from the largest customer in the MCS division correspond to about SEK 111 M of the segment's total revenues.

Geographic areas

The Group's operations are also divided into three geographic areas: Europe, Americas and Asia. Europe includes Europe, the Middle East and Africa, Americas includes North America, Central America and South America. Asia includes Asia excluding the Middle East and including Australia.

Divisions	Dehumidification		HumiCool		MCS		Eliminations etc.		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Income statement
External net sales	2,025	1,881	1,738	1,758	2,807	2,623	–	–	6,570	6,262
Internal net sales	26	55	5	7	2	1	–33	–63	–	–
Net sales	2,051	1,936	1,743	1,765	2,809	2,624	–33	–63	6,570	6,262
Operating earnings	201	234	155	251	48	129	5	6	409	620
Amortization of surplus values and impairment of goodwill	–5	–4	–4	–3	–1	–3	–	–	–10	–10
Undistributed costs	–	–	–	–	–	–	–37	–44	–37	–44
EBIT	196	230	151	248	47	126	–32	–38	362	566
Net financial items									–77	–40
Taxes									–120	–190
Net earnings									165	336
Balance sheet
Operating assets	855	672	787	764	1,028	1,040	79	61	2,749	2,537
Goodwill	233	163	556	458	189	173	–	–	978	794
Participations in associated companies	–	–	2	2	–	–	–	–	2	2
Other assets	–	–	–	–	–	–	885	529	885	529
Total assets	1,088	835	1,345	1,224	1,217	1,213	964	590	4,614	3,862
Operating liabilities	265	191	206	267	174	145	0	–8	645	595
Other liabilities	–	–	–	–	–	–	2,684	2,065	2,684	2,065
Total liabilities	265	191	206	267	174	145	2,684	2,057	3,329	2,660
Other data
Investments	37	52	35	42	88	129	7	1	167	224
Depreciation and impairments	25	24	39	39	93	86	5	3	162	152
No. of permanent employees at year-end 1,301		1,180	866	924	1,944	1,918	21	21	4,132	4,043

Geographic areas		Europe		Americas	Asia		Eliminations, etc.			Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Net sales	4,055	3,838	2,145	2,041	562	510	–192	–127	6,570	6,262
Operating assets	1,628	1,586	830	637	273	250	18	64	2,749	2,537
Operating liabilities	407	379	199	159	61	73	–22	–16	645	595
Investments	105	129	36	70	19	25	7	–	167	224
No. of permanent employees at year-end 2,658		2,516	1,021	1,108	429	397	24	22	4,132	4,043

NOTE 6 Other operating income and operating expenses

Group		Parent Company
2008	2007	2008	2007
3	–	–	–
7	–	–	–
1	0	–	–
–	–	2	2
11	0	2	2

Other operating expenses

	–3	–6	1	–1
Exchange-rate differences	–	–2	1	–
Reversal of provisions	–2	–1	–	–
Loss on divestment of fixed assets	–1	–	–	–1
Goodwill impairment	–	–1	–	–
Impairment of participations in associated companies	–	–2	–	–

Divestment of operations pertains to the Swedish business unit Fire and Restoration Operations, which was divested in 2008.

NOTE 7 Depreciation and impairments

Amortization and depreciation of intangible and tangible assets are based on the historical acquisition cost and the estimated useful lives of various types of assets. For assets acquired during the year, depreciation or amortization is calculated from the acquisition date. Depreciation and amortization are deducted primarily straight-line over the following useful lives.

Improvement measures in leased premises	3–7 years
Research and development work	5 years
Equipment within MCS operations	6 years
Patents, licenses and brands	3–10 years
Machinery and equipment	3–10 years
Buildings	20–33 years
Land lease	50 years

The useful life of acquired brands is based on the number of years that the brand is estimated to contribute revenues to the Group in its current form. The remaining useful lives for the brands are five years and six months, seven years and 11 months, eight years and three months, and nine years and nine months.

Goodwill impairment is reported among other operating expenses. See also Note 14.

Depreciation, amortization and impairments for the year were charged against the income statement as shown below.

	Group			Parent Company
	2008	2007	2008	2007
Cost of goods sold	127	116	–	–
Selling costs	17	13	–	–
Administrative costs	22	21	6	3
Research and develop
ment costs	1	1	–	–
Other operating expenses	–	1	–	–
	167	152	6	3

Impairment of acquisition-related assets totaled 10 (7) and is included in the item Selling costs.

Impairment of inventories

Impairment of inventories totaled 12 (12) and is included in the item Cost of goods sold. There were no reversals of previous impairments.

NOTE 8 Leasing

Operating leases

The year's costs for operating leases of assets, such as leased premises, machinery and major computer and office equipment are reported as operating costs and amounted to SEK 206 M (180).

Minimum future costs for non-revocable operating lease contracts have the following maturity.

496
36
290
170

Most of the vehicles used in service operations are currently classified as operating leases.

Financial leases

Assets held through financial lease contracts are reported as equipment. The year's total payments relating to the assets amounted to SEK 6 M (6). Depreciation during the year amounted to SEK 6 M (5).

Assets held under a finance lease refer primarily to vehicles. The minimum lease fee comprises a capital portion and an interest portion. The interest portion is variable and follows market interest rates prevailing in each country.

Assets held under a financial lease are reported as equipment in the following amounts:

Carrying amount	17	13
Accumulated depreciation	–21	–13
Acquisition cost – capitalized financial leases	38	26
	2008	2007

Liabilities pertaining to financial leases –

Present value of future minimum lease fees	15	10
Future financial costs for financial leases	–2	–3
	17	13
Between one and five years	10	8
Within one year	7	5
minimum lease fees	2008	2007

Present value of financial lease liabilities

	15	10
Between one and five years	9	7
Within one year	6	3

NOTE 9 Financial income and expenses

	Group		Parent Company
Financial income	2008	2007	2008	2007
Dividends from subsidiaries	–	–	250	258
Income from liquidation	–	–	20	–
Interest income, subsidiaries	–	–	70	60
Interest income, other	7	8	1	1
Exchange-rate differences	1	6	–	6
	8	14	341	325
Financial expenses
Interest expenses, subsidiaries	–	–	–1	–1
Interest expenses, other	–73	–44	–68	–40
Other financial expenses	–12	–10	–2	–1
	–85	–54	–71	–42
Total financial income
and expenses	–77	–40	270	283

NOTE 10 Income taxes

		Group	Parent Company
	2008	2007	2008	2007
Current tax expense	134	187	–14	–4
Tax relating to prior years/ withholding tax	4	–2	–	–
Deferred tax related to tem
porary differences and loss
carryforwards	–22	–2	2	–
Non-income-related taxes	4	7	–	–
Tax expenses reported in
the income statement	120	190	–12	–4
Tax items recognized directly in equity
Deferred tax attributable to
pensions	11	0
Reconciliation of effective tax
Earnings before tax	285	526	228	242
Tax according to prevailing tax rate for the Parent Company	79	146	64	67
Difference attributable to
foreign tax rates	25	32	–	–
Non-deductible expenses	17	17	0	0
Non-taxable income	–5	–12	–76	–71
Non-income-related taxes	4	7	–	–
Tax relating to prior years/
withholding tax	4	–2	–	0
Other	–4	2	0	–
Tax expenses	120	190	–12	–4

Deferred tax income attributable to changed tax rates in Sweden amounted to an expense of SEK 1 M for 2008. This amount is included in the item Other.

	Group
Deferred tax assets	2008	2007
Machinery and equipment	8	9
Inventory	13	13
Accounts receivable	29	10
Prepaid expenses and accrued income	0	1
Provisions	3	3
Accrued expenses and deferred income	35	29
Derivative instruments	0	0
Loss carryforwards	15	10
Provisions for pensions	23	14
Other	2	0
Offsetting	–2	–27
	126	62

Deferred tax assets for pension provisions pertain to the difference between the calculation of defined-benefit pension obligations according to local tax rules and IAS 19 Employee Benefits.

		Group
Deferred tax liabilities	2008	2007
Buildings	4	5
Machinery and equipment	16	15
Technology	8	8
Brands	25	19
Goodwill	6	5
Inventories	0	0
Untaxed reserves	11	11
Provisions	11	6
Other	8	5
Offsetting	–2	–27
	87	47

Deferred tax assets relating to unutilized loss carryforwards are reported to the extent that it is deemed likely that they will be used to offset taxable surpluses. The unutilized loss carryforwards amounted to SEK 53 M (33) at year-end, of which SEK 43 M (27) was unlimited in time and SEK 10 M (5) expires between 2009 and 2013. Loss carryforwards for which deferred tax assets are not reported amounted to SEK 6 M (5), of which SEK 1 M (0) was unlimited in time and SEK 5 M (5) expires between 2009 and 2013. Loss carryforwards totaling SEK 47 M (28) were thus suitable for reporting as deferred tax assets.

NOTE 11 Earnings per share

	Group
	2008	2007
Net earnings, attributable to shareholders in the Parent Company	163	332
Weighted average number of outstanding shares, 000s	73,933	73,898
– outstanding shares after dilution, 000s	73,933	73,913
Earnings per share, SEK	2.21	4.49
– after dilution	2.21	4.49

The number of shares and earnings per share are restated with respect to the 4:1 share split, redemption and the bonus issue that were implemented in 2007.

Earnings per share (before dilution) are calculated by dividing the net earnings attributable to shareholders in the Parent Company with the weighted average number of outstanding shares during the year.

In the calculation of earnings per share after dilution, the average number of outstanding shares is adjusted for the dilution effect of all potential shares. Munters has only stock options that entail a dilution effect. For such options, a calculation is made of the number of shares that could have been purchased at fair value (calculated as the average share price for the year) at an amount corresponding to the monetary value of the subscription rights associated with the outstanding stock options. The difference in value between the number of shares that would have been sold under the assumption that the stock options were utilized and the number of shares that would have been sold at the average share price during the period is treated as an issue of shares without payment. The weighted average number of shares is increased by the corresponding number of shares.

The option program from May 2004, which began to mature during 2007, resulted in a marginal dilution effect in 2007. The remaining option program will not result in a dilution effect, since the issue price exceeds the average share price during the year.

NOTE 12 Tangible assets

Group	Build		Equip
	ings and	Plant and	ment, tools, fixtures and	Construc tion in
	land	machinery	fittings	progress
Acquisition cost
Amount on January 1	310	592	983	22
Acquisition of subsidiaries (note 4)	–	1	5	–
Capital expenditure for the year	5	40	83	24
Sales and scrapping	–	–29	–53	–1
Reclassifications	20	–1	15	–35
Translation differences for
the year	37	64	116	2
Amount on December 31	372	667	1 149	12
Accumulated depreciation
Amount on January 1	138	448	721	–
Acquisition of subsidiaries (note 4)	–	–	1	–
Sales and scrapping	–	–24	–51	–
Reclassifications	–	–3	2	–
Depreciation for the year	10	43	92	–
Impairment for the year	–	5	–	–
Translation differences for the year	15	49	90	–
Amount on December 31	163	518	855	–
Closing carrying amount	209	149	294	12

Parent Company	Equipment, tools,
	fixtures and fittings
Acquisition cost
Amount on January 1	31
Capital expenditure for the year	8
Sales and scrapping	–1
Amount on December 31	38
Accumulated depreciation
Amount on January 1	11
Depreciation for the year	3
Amount on December 31	14
Closing carrying amount	24

Depreciation is based on the asset's acquisition cost and the estimated useful lives as specified in Note 7.

The carrying amount of land amounted to SEK 27 M (25). Taxation values of buildings in Sweden amounted to SEK 15 M (15). The taxation value of land in Sweden amounted to SEK 2 M (2).

NOTE 13 Patents, licenses, brands and similar rights

Group		Tech	Other intangible
	Brands	nology	assets	Total
Acquisition cost
Amount on January 1	55	24	71	150
Acquisition of subsidiaries (note 4)	13	–	10	23
Capital expenditure for the year	–	–	10	10
Translation differences for the year	11	4	6	20
Amount on December 31	79	28	97	203
Accumulated amortization
Amount on January 1	5	2	33	40
Acquisition of subsidiaries (note 4)	–	–	–	–
Amortization for the year	7	3	6	16
Translation differences for the year	1	–	3	4
Amount on December 31	13	5	42	60
Closing carrying amount	66	23	55	143

Brands

This item includes the brands Sial in the amount of SEK 24 M, Des Champs Technologies, SEK 26 M, Turbovent, SEK 2 M and Toussaint Nyssenne, SEK 14 M, which were valued when these operations were acquired.

Technology

This item includes ventilation and air treatment systems for commercial buildings in the amount of SEK 18 M, and ventilation and air cleaning technology in the amount of SEK 5, which was received and valued in conjunction with the acquisitions of Des Champs Technologies and Turbovent.

Other intangible assets

Other intangible assets include SEK 3 M relating to patents, SEK 33 M relating to capitalized development expenses for business and Group accounting systems, as well as SEK 6 M relating to a lease in China. Customer relations were valued at SEK 5 M in the acquired companies Munters Form and Toussaint Nyssenne in conjunction with the acquisitions.

Parent Company	Other intangible assets
Acquisition cost
Amount on January 1	18
Capital expenditure for the year	4
Amount on December 31	22
Accumulated amortization
Amount on January 1	1

Amount on December 31 Closing carrying amount	4 18
Amortization for the year	3

Investments for the year primarily refer to Field.Link, a mobile IT system in the MCS division that was launched in 2008.

NOTE 14 Goodwill

	2008	2007
Carrying amount before impairments
Amount on January 1	798	546
Acquisition of subsidiaries (note 4)	64	240
Exchange-rate differences for the year	120	12
Amount on December 31	982	798
Accumulated impairments
Amount on January 1	4	3
Impairments for the year	–	1
Amount on December 31	4	4
Closing carrying amount	978	794
Recognized goodwill value per cash-generating unit	2008	2007
Dehumidification, US	193	161
Dehumidification, Belgium	37	–
MCS, Australia	4	4
MCS, Germany	112	96
MCS, Norway and Denmark	68	73
MCS Sweden	6	–
HumiCool Aerotech, US	50	42
HumiCool, Italy	398	345
HumiCool, Denmark	80	71
HumiCool Turkey	28	–
Other	2	2
	978	794

Impairment

During 2007, an impairment was recognized of the entire goodwill value of SEK 1 M attributable to a Swedish operation in the MCS division due to the divestment of this operation. No impairment was recognized in 2008.

Impairment testing of goodwill values

On September 30, 2008, carrying amounts of goodwill were subjected to routine impairment testing. The assessments were carried out for each individual cash-generating unit. The valuation was based on the discounted future cash flow. This encompasses forecasts, approved by Group management and the Board, for the next three years. The growth rate after the three years has been cautiously estimated at 2 percent. In the calculations, a discount rate that is a nominal rate for the Group (Weighted Average Cost of Capital before tax) was used. It was determined as 11.0 percent (12.4). The most significant assumptions pertain to sales growth, the trend in the operating margin, utilization of operating capital employed and the discount rate.

The recoverable value was found to exceed the carrying amounts. Consequently, no impairment was necessary. The total value in use for the cash-generating units exceeded the carrying amount by a factor of 2.4. A 2.9-percentage-point increase in the discount rate is required for it to be necessary to recognize an impairment loss in one unit. For the other units, a significantly larger increase in the discount rate is required before it is necessary to recognize an impairment loss. Against the background of changed market prerequisites and financial turmoil, an additional assessment of some larger units was performed per December 31, 2008. The recovery value was found to exceed the carrying values. There was no other indication of a decline in value.

Acquisition of operations

The cash-flow statement shows the impact on cash and cash equivalents with respect to acquired operations. During 2008, the cash-flow impact pertained to the cash payments and direct expenses attributable to the acquisitions of Toussaint Nyssenne, Västgöta Torkteknik and Munters Form, and the payments of additional purchase prices for Sial that were previously reported as liabilities in conjunction with the acquisition.

NOTE 15 Participation in subsidiaries

Direct shareholdings		Percent	Carrying
	Country	age, %	amount
AB Carl Munters	Sweden	100	169
(corp. reg. no. 556035-1198)
Munters Beteiligungs GmbH	Germany	100	4
Munters BV	Netherlands	100	0
Munters Corporation	US	100	2
Munters France SAS	France	100	45
Munters Group Ltd	UK	100	0
Munters Italy SpA	Italy	100	87
Munters Korea Co Ltd	South Korea	100	0
Munters Ltd	UK	100	154
Munters (Thailand) Co Ltd	Thailand	100	1
Polygon AS	Norway	100	249
Polygon A/S	Denmark	19	1
Ateliers Toussaint Nyssenne SA	Belgium	100	79
			791

Indirect shareholdings in subsidiaries with significant business operations	Country	Percent age, %
Munters AG	Switzerland	100
Munters Air Treatment Equipment
(Beijing) Co Ltd	China	100
Munters A/S	Denmark	100
Munters Austria GmbH	Austria	100
Munters Brasil Industria e Comércio Ltda	Brazil	100
Munters de Mexico S de RL de CV	Mexico	100
Munters Euroform GmbH	Germany	100
Munters Europe AB (corp.reg.nr. 556380-3039)	Sweden	100
Munters-Form Endüstri Sistemleri
Sanayi ve Ticaret A.S.	Turkey	80
Munters GmbH	Germany	100
Munters Inc	Canada	100
Munters India Humidity Control Private Ltd	India	100
Munters KK	Japan	100
Munters Mist Eliminator (Beijing) Co Ltd	China	100
Munters NV	Belgium	100
Munters Oy	Finland	100
Munters Poland Sp zoo	Poland	100
Munters Pte Ltd	Singapore	100
Munters (Pty) Ltd	South Africa	100
Munters Pty Ltd	Australia	100
Munters Service GmbH	Germany	100
Munters Services France SAS	France	100
Munters Spain SAU	Spain	100
Munters Torkteknik AB (corp.reg.nr. 556034-6164) Sweden		100
Polygon A/S	Denmark	56
Turbovent Agro A/S	Denmark	100

NOTE 16 Participation in associated companies

	Country	Percent age, %	Acquisition value	Carrying value in the Group	Share in earnings 2008
Aerotech Asia	British Virgin
Inc Co	Islands	50	4	2	–

No business activities were conducted in the Company. The carrying value in the Group corresponds to the estimated recovery value in conjunction with a possible future liquidation of the company.

NOTE 17 Prepaid expenses and accrued income

	Group		Parent Company
	2008	2007	2008	2007
Prepaid rent and leases	9	6	1	1
Prepaid insurance premiums	8	8	–	–
Other items	100	51	11	5
	117	65	12	6

NOTE 18 Financial instruments

Munters' financial risks and how they are managed are described in Note 3 Financial instruments recognized as financial assets and financial liabilities.

Derivative instruments

At the end of the year, there were currency hedges within the Group according to the table below. They were reported at fair value in the balance sheet.

Currency	Net sales amount in local currency, 000s	Carrying amount, SEK 000s
EUR	–3,919	–123
USD	4,286	–1,400
GBP	50	122
DKK	2,250	–148
JPY	–247,156	191
PLN	–850	–21
AUD	102	–4
SGD	146	–18
Total		–1,401

Negative net sales amounts refer to purchasing and positive net sales amounts refer to selling.

All forward contracts fall due for payment during 2009.

Fair value of financial instruments

The carrying amounts of interest-bearing assets and liabilities in the balance sheet may deviate from their fair value due to such reasons as changes in market interest rates. The interest period for the Group's external loans is short. The fair value of such financial instruments as accounts receivable, accounts payable and other non-interest-bearing financial assets and liabilities, which are reported at accrued acquisition cost with deductions for any impairment, is deemed to correspond to the carrying amount due to the short terms of these instruments.

Categories of assets and liabilities

Group Currency de-

	rivatives to which
	hedge accounting	Loan and	Non
	of cash flow	accounts	financial
2008	is not applied	receivables	assets	Total
Assets
Tangible assets	–	–	664	664
Intangible assets	–	–	1,121	1,121
Other fixed assets	–	20	128	148
Inventories, etc.	–	–	589	589
Accounts receivable	–	1,354	–	1,354
Prepaid expenses and
accrued income	–	–	117	117
Derivative instruments	1	–	–	1
Other current receivables	–	71	59	130
Cash and cash equivalents	–	490	–	490
	1	1,935	2,678	4,614
2007
Assets
Tangible assets	–	–	600	600
Intangible assets	–	–	904	904
Other fixed assets	–	19	64	83
Inventories, etc.	–	–	536	536
Accounts receivable	–	1,292	–	1,292
Prepaid expenses and
accrued income	–	–	65	65
Derivative instruments	0	–	–	0
Other current receivables	–	58	48	106

0 1,645 2,217 3,862

2008	Currency de rivatives to which hedge accounting of cash flow is not applied	Other financial liabilities	Non financial liabilities	Total
Liabilities
Interest-bearing liabilities	–	1,694	–	1,694
Provisions	–	–	277	277
Accounts payable	–	537	–	537
Accrued expenses and
deferred income	–	386	44	430
Derivative instruments	2	–	–	2
Other liabilities	–	143	246	389
	2	2,760	567	3,329

Cash and cash equivalents – 276 – 276

2007
Liabilities
Interest-bearing liabilities	–	1,200	–	1,200
Provisions	–	–	231	231
Accounts payable	–	496	–	496
Accrued expenses and deferred income	–	353	24	377
Derivative instruments	1	–	–	1
Other liabilities	–	136	219	355
	1	2,185	474	2,660

NOTE 19 Equity

Share capital

The share capital of SEK 131,250,000 comprises 75,000,000 fully paid shares, each with a par value of SEK 1.75. Each share entitles the holder to one vote at General Meetings. There is one class of share. All shares carry the same right to a share in the Company's assets and profits. Each share entitles the holder to one vote at General Meetings with no limitations. There are no limitations to the transferability of the share under law or according to the Articles of Association.

Reserves

Reserves		Reserves for
	Reserves for	exchange-rate	Total
	unrealized gains	differences	reserves
January 1, 2007	2	–48	–46
Cash-flow hedges	–1	–	–1
Exchange-rate differences	–	10	10
December 31, 2007	1	–38	–37
Cash-flow hedges	–1	–	–1
Exchange-rate differences	–	137	137
December 31, 2008	0	99	99

The reserve for unrealized gains consists of the portion of gains and losses attributable to cash-flow hedges that are classified as effective.

The reserve for exchange-rate differences consists of differences that arise when the income statements and balance sheets of foreign subsidiaries are translated into Swedish kronor.

Holding of treasury shares

In order to cover its commitments for outstanding option programs, the company has acquired treasury shares.

	Number	Par value, SEK
January 1, 2007	1,215,750	2,127,563
Sales in 2007	–148,800	–260,400
December 31, 2007	1,066,950	1,867,163
Sales in 2008	–	–
December 31, 2008	1,066,950	1,867,163

During 2008, there were no purchases or sales of treasury shares. In total, treasury shares were acquired for a purchase price of SEK 56,983,367 corresponding to an average price including commission of SEK 53.41 per share.

Number of outstanding shares

Excluding treasury shares, the number of outstanding shares at year-end amounted to 73,933,050.

Options program

Outstanding options programs are described in Note 29.

Dividend during the year

The Annual General Meeting on April 22, 2008 approved the proposal of the Board of Directors and the President of a dividend amounting to SEK 2.50 per share, or SEK 184,832,625 in total.

Proposed dividend

The Board of Directors and the President propose to the Annual General Meeting that no dividend be paid to shareholders for 2008.

Changes in equity

	Attributable to the Parent Company shareholders				Minority	Total
Group	Share capital	Reserves	Profit brought forward	Total	interest	equity
January 1, 2007	125	–46	1,421	1,500	6	1,506
Cash-flow hedges, net	–	–1	–	–1	–	–1
Exchange-rate differences in translation of foreign subsidiaries	–	10	–	10	–	10
Actuarial gains and losses, net, including special employers' contribution	–	–	3	3	–	3
Total income and expenses recognized directly in equity	–	9	3	12	–	12
Net earnings	–	–	332	332	4	336
Total income and expenses	–	9	335	344	4	348
Sales of treasury shares	–	–	11	11	–	11
Bonus issue	6	–	–6	0	–	0
Redemption of treasury shares	–	–	–494	–494	–	–494
Dividend to Parent Company shareholders	–	–	–166	–166	–	–166
Dividend from subsidiaries	–	–	–	–	–3	–3
December 31, 2007	131	–37	1,101	1,195	7	1,202

Attributable to the Parent Company shareholders			Minority	Total
Group	Share capital	Reserves	Profit brought forward	Total	interest	equity
January 1, 2008	131	–37	1,101	1,195	7	1,202
Cash-flow hedges, net	–	–1	–	–1	–	–1
Exchange-rate differences in translation of foreign subsidiaries	–	137	–	137	–	137
Actuarial gains and losses, net, including special employers' contribution	–	–	–31	–31	–	–31
Total income and expenses recognized
directly in equity	–	136	–31	105	–	105
Net earnings	–	–	163	163	2	165
Total income and expenses	–	136	132	268	2	270
Dividend to Parent Company shareholders	–	–	–185	–185	–	–185
Dividend from subsidiaries	–	–	–	–	–2	–2
December 31, 2008	131	99	1,048	1,278	7	1,285

NOTE 20 Interest-bearing liabilities

	Group			Parent Company
	2008	2007	2008	2007
Syndicated credit facility	1,637	1,137	1,637	1,137
Other bank loans	16	31	–	–
Long-term liabilities	1,653	1,168	1,637	1,137
Other short-term credit facilities	26	22	–	–
Lease obligation	15	10	–	–
Current liabilities	41	32	0	0

Munters' borrowing from banks comprises a syndicated credit facility and bank loans to subsidiaries granted on an individual basis. The syndicated credit facility amounts to SEK 2,000 M and extends until 2012. Further information is provided in Note 3.

NOTE 21 Provisions for pensions and similar commitments

Group	2008	2007
Long-term defined-benefit commitments to
employees	177	134
Other long-term employee benefits	14	14
Other benefits to employees	17	14
Long-term	208	162
Short-term defined-benefit commitments to
employees	9	10
Short-term	9	10
Total provisions for pensions and
similar commitments	217	172
Long-term defined-benefit commitments to employees	177	134
Other long-term employee benefits	14	14
Short-term defined-benefit commitments to
employees	9	10
Reported provisions in accordance
with IAS 19	200	158

The Munters Group finances pension plans for employees in several countries. These plans mainly follow practice in the country in question and may be defined-contribution or defined-benefit plans or a combination of both. The largest defined-benefit plans cover employees in Sweden, Norway, the UK and Germany. In France and Italy, the companies make provisions for mandatory remuneration when employment is terminated.

Munters applies the alternative that IAS 19 allows, namely that actuarial gains and losses are recognized directly in equity in the period they occurred to the extent that they refer to remuneration after employment has been terminated. Actuarial losses amounted to SEK 40 M (gain: 2) for the period. The accumulated net loss amounted to SEK 71 M (33), which is included in the reported pension debt. The actuarial loss during 2008 was primarily due to significantly lower discount rates than on the preceding valuation date in 2007.

Other long-term employee benefits include employees in Germany.

The defined-contribution plans include primarily retirement pensions, disability pensions and family pensions. The premiums are paid continuously during the year by each Group company to separate legal entities, for example, insurance companies. The size of the premium is based on salary. The cost for definedcontribution plans for the year amounts to SEK 75 M (67).

Recognized provisions (changes for the year)	2008	2007
Amount on January 1	158	156
Pension costs	14	15
Actuarial losses(+)/gains(–)	40	–2
Benefits paid by employer	–13	–12
Premiums paid by employer	–1	–1
Company acquisitions	0	0
Terminated and changed benefit plans	0	0
Exchange-rate differences for the year	2	2
Amount on December 31	200	158

Reported provisions (on closing date)

Amount on December 31	200	158
Market value of plan assets (–)	–51	–68
Present value of unfunded obligations	178	155
Present value of wholly or partially funded obligations 73		71

Present value of defined-benefit obligations

Amount on December 31	251	226
Exchange-rate differences for the year	–4	4
Actuarial losses – experience-based adjustments	3	3
Actuarial gains(-)/losses(+) – changes in assumptions	24	–2
Terminated and changed benefit plans	0	0
Company acquisitions	0	0
Paid benefits	–15	–16
Interest expenses	11	9
Benefits earned during the year	6	5
Amount on January 1	226	223

Plan assets
Amount on January 1	68	67
Expected return on plan assets	–10	3
Premiums paid by employer	1	1
Benefits paid from plan assets	–1	–4
Terminated and changed benefit plans	0	0
Exchange-rate differences for the year	–7	1
Amount on December 31	51	68

Return on plan assets	2008	2007
Expected return on plan assets	–10	3
Costs for obligations during the year –
defined-benefit plans
Benefits earned during the year	6	5
Interest expenses	11	9
Expected return on plan assets	–4	–4
Amortization of previously earned benefits	0	1
Amortization of unrecognized actuarial gains and
losses on other long-term employee benefits	1	5
Terminated and changed benefit plans	0	–1
Costs for obligations during the year –
defined-benefit plans	14	15
Pension costs for defined-contribution plans	75	67
Distribution of pension costs in the
income statement
Administrative costs	78	73
Financial expenses	11	9
Total pension costs	89	82
Statement of income and expense
reported in the Group
Actuarial gains(+)/losses(–) during the year	–40	2
Effects of limitation on assets par. 58 (b)	0	0
Accumulated actuarial losses	–71	–33
Actuarial gains (+) and losses (–)
recognized directly in equity
Amount on January 1	–33	–35

Accumulated	–71	–33
Exchange-rate differences for the year	2	0
Terminated and changed benefit plans	0	0
Actuarial losses/gains on plan assets	–14	–1
Actuarial losses on obligations	–27	–1
Amortization of actuarial gains during the year	1	4
Amount on January 1	–33	–35

Plan assets

Equity instruments, %	36	55
Debt instruments, %	48	33
Property, %	9	6
Other assets (cash and cash equivalents), %	7	6

No portion of plan assets in 2008 or 2007 was invested in the Company's own equity instruments, debt instruments, properties or other assets utilized by the Company.

Significant actuarial assumptions Group,

weighted values
Discount rate, %	3.9	4.8
Return on plan assets, %	5.5	6.5
Future salary increases, %	2.6	3.2
Future inflation, %	1.9	1.8

The expected return for plan assets is based on the assumption that the return on bonds will be equal to the interest for a 10-year government bond and that the return on shares will amount to the same interest plus a risk premium.

77

	2008	2007	2006	2005	2004
Present value of defined
benefit obligations	251	226	223	212	183
Fair value of plan assets	–51	–68	–67	–71	–65
Net value funded and
partly funded plans	200	158	156	141	118
Experience-based adjustments			2008	2007	2006
Plan liabilities			3	3	9
Plan assets			–14	–1	2
Net experience-based adjustments			–11	2	11

Munters' budgeted fees for defined-benefit obligations amount to SEK 16 M for 2009.

Parent Company

	2008	2007
Defined-benefit obligations to employees	39	37
	2008	2007
Net liability attributable to the Company's own
pension obligations on January 1	37	35
Costs excluding taxes that were charged against
earnings	3	3
Payment of pensions	–1	–1
Capital value, calculated at present value,
of the Company's own pension obligations
on December 31	39	37
Obligations that are wholly or partly offset by
separated assets	0	0
Obligations for which there are no separated assets	39	37
Total	39	37
Recognized pension costs for the period	2008	2007
The Company's own pensions
Costs excluding interest expenses	3	3
Costs for the Company's own pensions,
excluding taxes	3	3
Insured pensions
Insurance premiums	3	4
Costs for insured pensions, excluding taxes	3	4
Recognized net costs, excluding taxes,
attributable to pensions	6	7

Reported net costs are recognized as an operating expense in their entirety.

The net discount rate applied was 4.50 percent and the commitments are calculated on salary levels on the closing date. Expected payments for defined-benefit pension plans for the next year amount to slightly less than SEK 3 M. Fees to the FPG/PRI system for 2009 are estimated to be approximately SEK 3 M.

NOTE 22 Other provisions

	Provisions for legal disputes	Warranty provisions	Other provisions	Total
On January 1, 2008	1	55	3	59
– Additional provisions	–	29	–	29
– Reversed, unutilized
amounts	–	–17	–	–17
Exchange-rate differences	–	9	0	9
Utilized during the year	–	–17	–2	–19
On December 31, 2008	1	59	1	61
Provisions comprise:			2008	2007
Long-term portion			2	3
Short-term portion			59	56

NOTE 23 Accrued expenses and deferred income

	Group		Parent Company
	2008	2007	2008	2007
Vacation pay liabilities	109	86	3	2
Social security expenses	45	24	5	3
Other personnel-related expenses	94	95	1	1
Received, non-invoiced goods, etc.	182	172	6	4
	430	377	15	10

NOTE 24 Pledged assets and contingent liabilities

Pledged assets for liabilities	Group		Parent Company
to credit institutes	2008	2007	2008	2007
Corporate mortgages	–	4	–	–
Other pledged assets	1	1	–	–
	1	5	–	–
Contingent liabilities
FPG guarantees	2	2	73	69
Bank guarantees	–	–	40	24
Parent Company guarantees	–	–	13	17
Other	0	1	–	–
	2	3	126	110

FPG guarantees refer to pension liabilities in Sweden. Other guarantees are normal operational guarantees, for example, advances and completion guarantees.

Legal proceedings

The most significant legal processes are attributable to Munters' subsidiary in the US. As of December 31, 2008, the company was named co-respondent in 52 (51) asbestos-related cases. To date, none of the plaintiffs have claimed to have been exposed to any specific Munters product. In the past few years, Munters Corporation has won four cases through summary judgments, meaning that these cases are now closed. Munters Corporation is of the firm opinion that the remaining claims are unfounded, and it will strongly dispute every claim. Munters Corporation has protection for the asbestos-related claims by having taken out several insurance policies. Under the condition of certain reservations,

the insurance companies have confirmed that, until further notice, they will pay a significant portion of the defense expenses.

For a period of time, a product within the Dehumidification division in the US suffered from a specific component fault. The reason for the fault was identified during 2008 and was attributable to a component supplied by a third party. Munters has initiated legal proceedings against the third party and is confident that it will be able to obtain compensation for a large part of the guarantee costs that arose due to the fault. Munters' costs for addressing these faults were charged against earnings as they were incurred. Estimated compensation from the legal process has not been recognized as revenue in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

Munters does not believe that any of the claims mentioned above will have any significant negative impact on the Company's financial position or operating results.

Munters is also involved in a small number of commercial disputes. None of these disputes is deemed to have any major negative impact on the Company's financial position or operating results.

NOTE 25 Transactions with related parties

There are no significant contractual relations or transactions between Munters AB and related parties. Remuneration and terms of employment for senior executives and individual members of the Board of Directors are presented in Notes 28 and 29. Munters AB has not provided guarantees or guarantee commitments to or on behalf of Board members or senior executives. During the current or the preceding fiscal years, no member of the Board of Directors or senior executive was directly or indirectly involved in any business transaction with the Company that is or was unusual in nature or with respect to its terms or that in any respect remains unsettled or incomplete.

The Parent Company's sales to Group companies amounted to SEK 51 M (51). Purchases from Group companies amounted to SEK 22 M (15).

NOTE 26 Average number of employees, absence due to illness, gender distribution

Average no. of employees		2008	2007
		Of which		Of which
Group Australia	Number 135	men, % 71	Number 133	men, % 73
Austria	71	81	81	83
Belgium	86	90	68	85
Brazil	44	91	26	88
Canada	14	86	14	86
China	161	79	159	79
Denmark	147	70	141	70
Finland	369	88	311	89
France	82	84	74	83
Germany	564	85	568	84
India	9	78	2	50
Indonesia	1	100	1	100
Ireland	5	60	8	63
Italy	276	81	277	79
Japan	53	89	52	90
Korea	15	80	11	82
Mexico	99	82	129	86
Netherlands	127	90	107	88
New Zealand	4	77	3	67
Norway	244	68	253	70
Poland	15	73	13	77
Russia	2	100	2	100
Saudi Arabia	3	100	3	100
Singapore	17	76	17	76
South Africa	32	78	28	75
Spain	15	47	13	62
Sweden	390	83	378	84
Switzerland	19	89	20	90
Taiwan	2	50	1	0
Thailand	24	67	27	70
Turkey	10	50	–	–
United Arab Emirates	2	100	2	100
United Kingdom	315	74	342	78
US	938	82	1,001	82
Vietnam	3	67	3	67
	4,291	81	4,268	81
Of which Parent Company (Sweden)	30	67	24	64

Absence due to illness

Absence due to illness among employees of Munters AB during the year amounted to 2.64 percent (4.17) of the employees' normal working time, of which absence due to illness for > 60 consecutive days accounted for 1.2 percent (3.47). Of total absence due to illness, 2.17 percent pertained to men and 0.47 percent to women. Information according to the Annual Accounts Act on absence due to illness for different groups of employees is not provided, since the number of employees per group was less than ten.

Gender distribution among Company Management

At year-end, the Board of Directors consisted of eight men and two women. The Group management, including the President of the Parent Company, consisted entirely of men. Presidents of the subsidiaries included in the Group were also 100 percent men.

NOTE 27 Wages, salaries and other remuneration and social security expenses

		2008		2007
	Salaries and other remu neration	Social security expenses	Salaries and other remu neration	Social security expenses
Parent Company	28	16	23	15
of which, pension expenses	–	6	–	6
Subsidiaries	1,578	367	1,502	332
of which, pension expenses	–	84	–	76
Group	1,606	383	1,525	347
of which, pension expenses	–	89	–	82

Group		2008			2007
	President and Board of Direc tors	Of which variable remu neration	Other employ ees	President and Board of Direc tors	Of which variable remu neration	Other employ ees
Australia	1	–	46	1	0	44
Austria	–	–	29	–	–	27
Belgium	2	0	37	–	–	30
Brazil	1	0	11	–	–	13
Canada	0	–	6	0	–	7
China	1	0	7	1	0	11
Denmark	1	–	69	2	1	48
Finland	1	0	102	1	0	93
France	1	0	31	1	0	27
Germany	–	–	246	2	0	235
India	1	–	1	–	–	0
Indonesia	–	–	0	–	–	0
Ireland	–	–	2	–	–	3
Italy	3	–	98	6	2	82
Japan	2	0	14	2	1	19
Korea	–	–	3	–	–	3
Mexico	1	–	12	1	0	13
Netherlands	3	0	50	2	0	40
New Zealand	–	–	1	–	–	1
Norway	1	–	107	1	0	103
Poland	1	0	3	0	0	2
Russia	–	–	1	–	–	1
Saudi Arabia	–	–	1	–	–	1
Singapore	1	0	3	1	0	3
South Africa	1	0	5	1	0	8
Spain	3	–	5	1	0	4
Sweden	8	1	155	8	1	140
Switzerland	–	–	11	–	–	11
Taiwan	–	–	1	–	–	0
Thailand	1	0	2	1	0	2
Turkey	1	1	3	–	–	–
United Arab Emirates	–	–	1	–	–	1
United Kingdom	2	0	112	3	1	131
US	6	0	392	6	1	381
Vietnam	–	–	1	–	–	1
	42	4	1,564	42	9	1,483
Of which
Parent Company (Sweden)	6	0	22	7	1	16

NOTE 28 Remuneration to Board members and senior executives

Principles

The Board Chairman and members of the Board of Directors receive fees according to the Annual General Meeting's decision. Fees are paid for committee work. Employee representatives receive no Board fees. The Annual General Meeting, held in April 2008, decided on the following principles for remuneration to senior executives.

Salaries for senior managers shall be competitive and on market terms and with other terms of employment that correspond to the manager's responsibility, authority, expertise and experience. Reconciliation of total compensation against market statistics and other information shall be performed regularly. In addition to a fixed annual salary, senior managers may also receive a variable salary, which will be based on the Group's earnings per share for the President and for other managers on improvements in the manager's area of responsibility with respect to earnings per share, sales, operating earnings and capital turnover rate, as well as the outcome of individual activity plans. The variable salary component shall correspond to at most 50 percent of the fixed annual salary for the President and at most between 30 and 70 percent for other senior managers. The Company may subsidize or compensate interest expenses when a senior manager acquires shares in a transaction in which the executive assumes all risk. Between the Company and other senior executives, the period of notice shall not be longer than six months and severance pay shall not correspond to more than 18 months' salary (basic salary) for the President and 12 months' salary (basic salary) for other senior executives. The President is encompassed by a defined-contribution plan, according to which the contracted premium provision may amount to a maximum of 35 percent of the basic salary. Other senior executives residing in Sweden are encompassed by the ITP plan, in addition to which certain contribution-based supplements may be paid. For these programs, the total premium provision may amount to between 20 and 35 percent of the pension-entitling salary. Senior executives residing outside Sweden are offered pension solutions that are competitive in the country in which they reside.

Every year, the Board considers whether a share-price-related incentive program is to be proposed to the Annual General Meeting. A share-price-related incentive program that has not been decided on by an Annual General Meeting shall not exist in the Company. Board fees are established by the Annual General Meeting. If a Board member is employed by the Company, remuneration shall be paid to such a member in accordance with these principles, with no separate remuneration paid to the Board member for the Board assignment. If a Board member performs assignments for the Company that are not Board assignments, the remuneration to be paid shall be market-based with respect to the nature of the assignment and the work required. These principles shall encompass individuals who, during the period in which the principles apply, are members of Group management, other managers in a senior position directly under the President or Board members. The principles apply to contracts signed after the decision by the Annual General Meeting and for cases in which changes are made to existing contracts after this time. The Board is entitled to deviate from the principle if there are special reasons in a specific case, provided that this deviation is reported and subsequently justified.

In addition to the ordinary program for variable salary, one division president has a special bonus for the years 2008–2010 corresponding to 0–50 percent of the fixed annual salary. Payment of this bonus will take place in 2011 and is subject to employment on January 1, 2011. The outcome will be based on performance linked to long-term goals for the division's net sales, capital employed and operating margin.

Remuneration and other benefits to senior executives during the year

	Board fee	Variable			Other
Amounts in	Base	remu	Other	Pension	remu
SEK 000s	salary	neration	benefits	expenses	neration	Total
Chairman
of the Board,
Anders Ilstam	550	–	–	–	–	550
Board member,
Kenneth Eriksson	250	–	–	–	–	250
Board member,
Bengt Kjell	275	–	–	–	–	275
Board member,
Eva-Lotta Kraft	300	–	–	–	–	300
Board member,
Sören Mellstig	300	–	–	–	–	300
Board member,
Jan Svensson	350	–	–	–	–	350
Board member,
Kjell Åkesson	250	–	–	–	–	250
President	3,900	–	136	1,185	248	5,469
Other senior
executives
(4.8 individuals)	9,005	–	1,041	1,605		274 11,925
Total	15,180	–	1,177	2,790		522 19,669

The Board fee refers to both the fee to elected Board members and to the fee to the members of the Audit Committee and Remuneration Committee. No fees are paid for the work of the Nomination Committee.

Senior executives are the CEO (President), Chief Financial Officer, President of the Dehumidification division, President of the HumiCool division, President of the MCS division, and Group Vice President Human Resources and Corporate Communication.

Variable remuneration for the 2008 fiscal year refers to expensed variable remuneration. No variable remuneration was expensed during 2008.

Other benefits refers to company cars and meal benefits. Pension expenses include costs for disability pension insurance and survivor annuity, etc. The amounts are stated excluding special employer's contribution on pension expenses.

Other remuneration refers to the payment of interest subsidies in 2008 for purchase of Munters' shares (see Note 29).

Pension

The Swedish ITP plan is a multi-employer plan insured by Alecta. It is a defined-benefit plan, but since the plan assets and commitments cannot be allocated to each employer or individual person, the plan is reported as a defined-contribution plan. Accordingly, future commitments for the senior executives cannot be provided.

One senior executive domiciled in the US is covered by the general 401k pension plan plus a special premium-based pension plan. Funds are allocated monthly to a fund and correspond on each occasion to the Company's commitments. The Company's commitment on December 31, 2008 amounted to SEK 1,240,000.

All pension plans for senior executives are vested – that is, not conditional on future employment.

Severance pay

Between the Company and the President and other senior executives, the period of notice shall not be longer than six months. If employment is terminated by the Company, severance pay will be received amounting to 12 months' salary (18 months for the President). Severance pay is not considered pensionable income, except for the President, and is reduced by income from other employment. If the President or other senior executive takes the initiative in terminating employment, there is no severance pay.

Financial instruments and options program

The President and other senior executives have participated in the options program, approved by the Annual General Meeting during the past year. No options were allotted since the improvement in earnings per share for 2008 in relation to 2007 was not attained as stipulated in the requirements of the program. See also Note 29.

Procedure and decision process

The Board of Directors has appointed a Remuneration Committee among its members consisting of Anders Ilstam and Bengt Kjell. The work of the Committee is presented in the Corporate Governance Report on page 38.

NOTE 29 Outstanding incentive programs

During the years 2004 and 2006, Munters implemented stock option programs directed to Group management and senior executives in the Group. The options for all outstanding stock option programs were purchased at a market premium, which is recognized as an increase in the Group's equity. To cover the Company's commitments according to the stock option programs, treasury shares have been acquired, with the purchase price being recognized as a reduction of the Group's equity. In future, when options are redeemed, the subscription price received will be recognized as an increase in the Group's equity. During the year, the option premium was subsidized at 40 percent for the 2004 start year and will be subsidized at 60 percent for the 2006 start year of the option premium in the form of a cash bonus, on condition that the option holder is employed at the time of the options' redemption period. The subsidy and associated social costs will be charged against consolidated earnings. Provisions for these subsidies amounted to slightly more than SEK 1 M on the closing date.

The change in the number of outstanding share options and their weighted average redemption price (SEK) are as follows:

	2008		2007
	Average exer cise price	Options	Average exer cise price	Options
January 1		97.57 117,500		95.33 128,100
Issued	–	–	–	–
Utilized	–	–		70.40 –10,600
Expired		106.40 –10,000	–	–
Matured		82.00 –42,500	–	–
December 31	106.40	65,000		97.57 117,500

The exercise price is translated with consideration taken to the share split and bonus issue that was implemented in 2007.

Each option entitles the holder to purchase 3.21 shares.

		75,000	65,000
	March 31, 2010 75,000			65,000 32.80/19.10 106.40
2006	Sept. 1, 2009 –
year	Exercise period	options	at year-end	SEK	SEK
Starting		No. of issued	No. of outstand ing options	Option premium,	Exercise price,

An employee option program was approved for the years 2007– 2008. No allotment took place, since the targets were not attained.

During the period from September 2007 to March 2008, the option program started in 2004 was redeemed. None of the 42,500 options were exercised by the option holders, since the exercise price of SEK 82.00 exceeded the average weighted share price of SEK 74.73 during the exercise period.

Incentive program for senior executives

The President holds 25,000 options in the program started in 2006. One senior executive hold 5,000 options in the program started in 2006.

Munters also subsidizes the acquisition of shares in Munters made by Group Management in a share-purchase program approved by the Board. The subsidy means that during the period up to December 31, 2011 or at most to the termination of employment, Munters subsidizes the interest expenses for loan financing of current acquisitions by senior executives. In October 2005, within the framework of the offering, one senior executive acquired 30,000 shares in an amount of SEK 1,950,000 and in February 2008, two other senior executives acquired 45,000 shares for a total of SEK 2,860,000. During 2006, the President acquired 36,000 shares in an amount of SEK 2,931,000 that are also included in this subsidy.

NOTE 30 Fees to auditors

	Group		Parent Company
Amounts in SEK 000s	2008	2007	2008	2007
Ernst & Young
Audit	8,025	7,500	581	429
Other assignments	2,238	1,193	317	184
Other
Audit	922	1,324	–	–
Other assignments	1,417	948	–	–
		12,602 10,965	898	613

An audit entails an examination of the annual report and accounts, as well as the management by the Board of Directors and the President, other tasks for which the Company's auditors are responsible for performing, and providing advice and other council occasioned by this examination or the performance of other tasks. Other assignments relate mainly to consultation on taxation matters.

NOTE 31 Events after closing date

During the first quarter of 2009, Munters implemented a number of measures to adapt operations to the weaker market conditions. Within MCS, these measures included phasing out of certain operations, centralization of administration and merging of certain business units resulting in personnel reductions. Within Humi-Cool efficiency measures involved the production structure and volume-related personnel reductions. Dehumidification will reduce indirect personnel to lower its cost levels. Total costs are estimated at SEK 30–45 M, which will be charged against earnings in the first quarter. Overall, personnel will be reduced by about 250 persons, while annual cost savings in ongoing operations over the coming 12-month period are estimated at SEK 75 M after full implementation.

NOTE 32 Company information

Munters AB (publ) is a Swedish public limited company registered with the Swedish Companies Registration Office. Its Corporate Registration Number is 556041-0606. The registered office of the Board Directors of Munters is in the Municipality of Stockholm in Sweden.

The principal operations of the Group are described in Note 5. The Company's shares are listed on the NASDAQ OMX Nordic Exchange Stockholm.

The consolidated accounts for the fiscal year ended December 31, 2008 were approved by the Board and the President on March 6, 2009 and will be presented to the Annual General Meeting on April 15, 2009 for adoption.

Proposed distribution of earnings

Future outlook

Munters commands a strong market position in its areas of operation and employs reorganization and efficiency measures on an ongoing basis. The outlook for a long-term favorable development is good.

Proposed distribution of earnings

Total	798,587,275
Net earnings for the year	234,364,368
Profit brought forward	562,105,407
Share premium reserve	2,117,500
The following earnings (SEK) are at the disposal of the Annual General Meeting:

The Board of Directors proposes that profit be distributed as follows: Distributed to shareholders – To be carried forward 798,587,275 Total 798,587,275

The Board of Directors intention is to apply a dividend policy entailing that the future dividend level is adapted to Munters' earnings level, financial position and other factors that the Board considers relevant. The annual dividend shall consist of about half of the Group's average net earnings measured over a period of several years. In consideration of the prevailing unpredictability of financial market and the real economy, the Board of Directors proposes that no dividend be paid for 2008.

Assurance

The undersigned assure that the Annual Report has been prepared in accordance with generally accepted accounting principles for listed companies, and that the consolidated accounts have been prepared in accordance with international accounting standards as referred to in Regulation (EC) No 1606/2002 of the European Parliament and of the Council of July 19, 2002 on the application of international accounting standards, provide a true and fair view of the Company's and the Group's financial position and earnings and that the Board of Directors' Report and the Board of Directors' Report for the Group provide a fair view of the development of the Company's and the Group's operations, financial position and earnings and describe material risk and uncertainty factors to which the Company and the companies included in the Group are exposed.

Kista, March 6, 2009

Anders Ilstam Kenneth Eriksson Bengt Kjell

Eva-Lotta Kraft Sören Mellstig Pia Nordquist

Jan Svensson Kjell Wiberg Kjell Åkesson

Board member Board member Board member Employee representative

Lars Engström President Board member

Chairman Board member Board member

Board member Board member Board member Employee representative

Our auditor's report was submitted on March 6, 2009

Ernst & Young AB

Björn Fernström Authorized Public Accountant

Auditor's report

To the Annual General Meeting of Shareholders in Munters AB (publ) Corporate Registration Number 556041-0606

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of Munters AB for the fiscal year 2008. The annual accounts and consolidated accounts are included in the printed version of this document on pages 42–45 and 50–82. The Board of Directors and the President 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, IFRS, 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 high but not absolute 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 President and significant estimates made by the Board of Directors and the President when preparing the annual accounts and 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 President. We also examined whether any Board member or the President 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, thereby, 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 IFRS 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 Board of Directors' Report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the general 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 Board of Directors' Report and that the members of the Board of Directors and the President be discharged from liability for the fiscal year.

Stockholm, March 6, 2009 Ernst & Young AB

Björn Fernström Authorized Public Accountant

1 Lars Engström

President and CEO. Born 1963. Employed since 2006. Background: MSc Mech Eng, Linköping Technical University. Various positions within Atlas Copco in Sweden and Australia, most recently as President of Atlas Copco Underground Rock Excavation Division. Shares held: 43,000. Options: 25,000.

2 Martin Lindqvist

Group Vice President and Chief Financial Officer. Born 1970. Appointed in March 2009. Background: MSc Business Administration Mid Sweden University. Various positions within Tetra Pak Sweden and Italy, Trelleborg in Mexico and most recently Group Controller, Mercuri Urval Group. Shares held: 0.

3 Andreas Olofsson

Group Vice President Human Resources and Corporate Communications. Born 1970. Employed since 2007. Background: MSc Econ., Uppsala University. Management consultant at Connecta, Manager International Assignments at Sandvik and most recently Director of Human Resources and Organization at Bahco Group (Snap-on Inc.). Shares held: 15,000.

4 Mike McDonald

President Dehumidification division, Executive Vice President. Born 1947. Employed since 1995. Background: BSc Business Administration and Economics, Drury College, Senior Executive Development Program, Northwestern University. President of Reda Pump Company. Shares held: 38,400. Options: 5,000.

5 Per Segerström

President HumiCool division, Group Vice President. Born 1956. Employed since 2003. Background: MSc Mech Eng., Royal Institute of Technology, Stockholm. Various positions within ABB in Sweden, Australia and Spain, most recently as Senior Vice President within the Substations business area. Shares held: 9,000.

6 Morten Andreasen

President MCS division, Group Vice President. Born 1958. Employed since 2008. Background: B.S. Econ., Copenhagen University, Director of SAS Service Partner, President of Top Flight Catering AB, Senior Vice President LSG Sky Chefs. Shares held: 30,000.

Information is as of March 6, 2009.

Definitions of financial key figures

Capital employed – Total assets less non-interest-bearing provisions less noninterest-bearing liabilities.

Capital turnover rate – Net sales divided by average capital employed calculated on the opening and closing balances for the past four quarters.

Cash and cash equivalents – Cash and bank balances plus current investments with maturity periods not exceeding three months.

Earnings per share – Net earnings divided by the weighted average number of shares. EBIT margin – EBIT divided by net sales. Equity per share – Equity (excluding minority interest) divided by the number of shares outstanding on the closing date.

Equity/assets ratio – Equity (including minority) interest divided by total assets. Interest coverage ratio – Earnings after financial items plus financial expenses (excluding exchange-rate differences) divided by financial expenses (excluding exchangerate differences).

Net debt – Interest-bearing liabilities plus defined-benefit commitments to employees less interest-bearing assets less cash and cash equivalents.

Net debt/equity ratio – Net debt divided by equity (including minority interests). Operating assets – Intangible assets

excluding goodwill plus tangible assets plus inventories, etc., plus accounts receivable. Operating capital – Operating assets less operating liabilities.

Operating cash flow – Cash flow from current operations and investing activities excluding acquisitions of operations and the sale of operating segments.

Operating earnings – Operating earnings corresponds to EBIT excluding goodwill impairments and surplus values depreciation.

Operating liabilities – Advances from customers plus accounts payable. Operating margin – Operating earnings divided by net sales.

Operating working capital – Inventories, etc., plus accounts receivable less advances from customers less accounts payable.

Glossary

P/E (price/earnings) ratio – Share price on closing date divided by earnings per share. Return on capital employed – Earnings

after financial items plus financial expenses (excluding exchange-rate differences) divided by average capital employed calculated on the opening and closing balances in the past four quarters.

Return on operating capital – Operating earnings divided by the average operating capital using the past 12 months' opening and closing balances as a base.

Return on equity – Net earnings divided by average equity calculated on the opening and closing balances of the last four quarters. Minority interest is excluded from earnings as well as equity.

Absolute humidity – The volume of water that air contains as generally measured in grams per kilogram of air.

Absorption – Accumulation of moisture, for example, by a substance, which then changes chemically or physically.

Adsorption – Accumulation of moisture, for example, by a substance, which does not change, either chemically or physically.

AgHort – Agriculture and Horticulture. CELdek® – A product of specially impregnated cellulose for evaporation and cooling

of air. Cooling tower – A facility for evaporative cooling of water.

Dehumidification – A division within Munters whose products are based on dehumidification.

Dehumidifier – Equipment for dehumidification of air.

DesiCool™ – A technology for cooling air through a combination of dehumidification and evaporative cooling.

Dew point – The temperature to which air must be cooled for the water vapor in the air to condense.

DryCool – (Previously HCU) A product that uses energy-efficient technology to control temperature and humidity independently of one another and uses waste heat to reactivate the sorption rotor.

ERV – (Exhaust Recovery Ventilation) A technology for heat recovery. Outdoor air is pre-treated with condenser heat before being fed into the building.

Evaporative cooling – Cooling that occurs when a liquid, such as water, evaporates. Field.Link – Mobile IT system for field engineers and customer centers that enables rapid and effective damage limitation. FGD – Flue-gas desulfurization is a techno-

logy applied in coal-fired power plants to clean flue gases from sulfur emissions that cause so-called acid rain.

GLASdek® – A product of specially impregnated spun glass for humidification and cooling of air.

GTEC – A cooling system for intake air to gas turbines.

HCU – A general term for a Humidity Control Unit. See also DryCool.

HumiCool – A division within Munters whose products are based on evaporative cooling and humidification.

HVAC – Heating, Ventilation and Air Conditioning

Leak detection – A search method which exploits changes in moisture, temperature and sound waves that leaks cause.

MCS, Moisture Control Services – A division within Munters focused on moisture technology services with an emphasis on the restoration of water and fire damages. MEP – Munters' continuous program for increased efficiency and continuous improvement within manufacturing and internal processes.

MEP2 – Initiatives during 2008 for rationalization of production and logistics, implementation of mobile IT and improving the processing of accounts receivable.

Mist eliminator – A component for removing drops of liquid from a flow of gas. Mollier diagram – A diagram that shows the correlation between absolute humidity, relative humidity, temperature and energy. PowerPurge™ – New, patented technology to recover energy from the dehumidification process. By returning surplus heat from the dehumidification rotor to the regenerated air and simultaneously reducing the need for after cooling of the process air, energy costs can be reduced by up to 40%.

RH, Relative Humidity – Expresses the relationship between the water content of air at a given temperature and the maximum amount that the air can hold at the same temperature.

Sorption rotor – A rotor for dehumidification through sorption.

The Humidity Expert – A concept for positioning Munters.

Thermodynamics – The study of energy, particularly the characteristics of heat, its conversion to other energy forms and its ability to perform work. Based on laws of nature.

VOC – Volatile Organic Compounds. Zeol – An operation within Munters focused on adsorption of VOC from air with zeolites, a substance that adsorbs VOCs.

ProduCtion: Citigate Stockholm. PRINT: Strokirk Landströms. PHoto: Peter Knutsson, Labe Allwin, Lars Strandberg, Nordic Photos, istockphoto, arCHIVE PICTURES fROM Munters, Sandvik AND V&S Group.

Munters AB (publ)

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