Micronic

Laser Systems AB

Annual Report 2008

Highlights of 2008
Comments by the CEO
The Micronic share
Micronic's markets
Micronic's long-term strategic model
Micronic's operations and products
Micronic's employees, environment and society
Micronic's technology
Corporate governance report
Board of directors and auditor
Executive management and subsidiary presidents
Financial overview
Micronic's history
Glossary

FINANCIAL REPORTS

Report of the directors
Risks and risk management
Consolidated profit and loss account
Comments on the consolidated profit and loss account
Consolidated cash flow statement
Consolidated balance sheet
Comments on the consolidated balance sheet and cash flow statement
Consolidated statement of changes in equity
Parent Company profit and loss account
Parent Company cash flow statement
Parent Company balance sheet
Parent Company statement of changes in equity
Additional information and notes
Audit report

FINANCIAL CALENDAR

Interim report January–March, April 21
Interim report January–June, July 8
Interim report January–September, October 16

NOTICE OF AGM

The Annual General Meeting (AGM) will be held at 5 p.m. on Wednesday, April 1, 2009, at Näsby Slott in Täby.

RIGHT TO PARTICIPATE

In order to participate in the AGM, shareholders must be entered in the share register maintained by VPC AB (the Nordic Central Securities Depository) not later than March 26, 2009, and must notify the company of their intention to participate in the AGM not later than 12 p.m. on March 30, 2009.

REGISTRATION

Shareholders can register by mail to Micronic Laser Systems AB (publ.), Box 3141, SE-183 03 Täby, Sweden, by telephone +46 (0)8-638 54 64 or by e-mail: [email protected]. The registration should include the shareholder's name, address, telephone number, personal or corporate identification number and registered shareholding.

NOMINEE SHARES

To be entitled to participate in the AGM, shareholders whose shares are held in the name of a nominee must temporarily re-register the shares in their own names with VPC AB. Shareholders must notify their nominees in good time prior to March 26, 2009, at which time such registration must be completed.

NOTICE TO ATTEND

No later than four weeks prior to the AGM, a notice to attend the AGM will be published in Post- och Inrikes Tidningar and Svenska Dagbladet and will be posted on Micronic's website www.micronic.se

FINANCIAL INFORMATION

The annual report will be sent to all registered shareholders during week 12, 2009.

All financial reports and press releases can be viewed on Micronic's website: www.micronic.se. It is also possible to subscribe for financial information and press releases via the website or directly from Micronic.

The total number of flat panel displays forecasted for production in 2009 will have a combined surface area of 130 million m² (DisplaySearch, January 2009), equal to 18,200 football fields. In the year 2000 the production of flat panel displays equaled to 600 football fields.

MICRONIC 2008

Micronic in brief

Micronic Laser Systems is a Swedish high-tech company engaged in the development, manufacture and marketing of one of the world's most advanced production systems – the pattern generator. These are used by leading electronics companies worldwide to produce photomasks for the manufacture of products such as television and computer displays, semiconductor circuits and electronic packaging.

MICROLITOGRAPHY IS THE LINK BETWEEN DESIGN AND MASS PRODUCTION

In order to manufacture electronic components such as displays, semiconductor chips or electronic packaging, the component design, a pattern, must first be created in a CAD system and then transferred onto a photomask blank.

The component design is written with a Micronic pattern generator onto a photomask, a glass or quartz substrate coated with a light sensitive material.
The photomask functions in the same way as a negative in the photographic process, and a template is produced. The size of both the pattern and photomask varies depending on the component to be manufactured. The more patterns that can be fit onto a photomask, the more cost-effective production is possible.

Left: Display photomask 1220 × 1400 mm.

Middle: Semiconductor photomask 6 × 6".

Right: Photomask for electronic packaging 500 × 600 mm.

Using an exposure system, the photomask can now be repeatedly copied, or stepped, onto the substrate to be manufactured: glass substrates for displays, silicon wafers for semiconductor chips, etc.

The electronic component is ready to be mounted in a TV, computer, cell phone, etc.

Left: Display panel in cross-section.

Middle: Semiconductor, for example a computer memory chip.

Right: The chip is packaged so that it can be connected to other electronic components.

Micronic has delivered a total of more than 150 systems, of which 80 percent are found in Asia.

MICRONIC'S BUSINESS CONCEPT

To offer pattern generation tools for the electronics industry based on optical solutions.

MICRONIC'S ROLE

Micronic's pattern generators are used to write photomasks, which then function as templates for mass production of displays, semiconductor chips and electronic packaging.

Micronic's pattern generators are a critical enabler for tomorrow's products in imaging technology and electronics. Micronic is setting the pace in product development through the use of next generation technology.

CUSTOMERS

Micronic has some 10 major customers around the world. The majority of these,

80 percent, are found in Asia. The customers can be divided into two categories. The first consists of commercial or "merchant" mask shops that are subcontractors to electronic manufacturers, such as Toppan, DNP and Hoya. The second category is made up of large electronics manufacturers with captive mask shops, like Intel, Samsung and LG.

MICRONIC IN EVERYDAY LIFE

Many electronic devices and all displays contain components manufactured with a technology spearheaded by Micronic. In the fast-paced evolution of communication and media technology, increasingly large HDTV sets and super compact digital cameras with ever-growing pixel counts are two examples of how Micronic's products are contributing to the technological advances taking place around us.

MICRONIC'S MARKET POSITION

Micronic has a forefront position in the display market, where the company's pattern generators and metrology systems are industry standard. This position has been achieved through patented state-of-the-art technology and an effective global customer service organization. Micronic's competitive strengths are its strong technological lead, high writing accuracy and superior productivity.

In the semiconductor market, Micronic is an established supplier that offers the market pattern generators for cost-effective production of photomasks for both leading edge semiconductor devices and volume production of simpler IC designs.

A niche market is that for advanced electronic packaging systems, a technology used to connect and protect semiconductor chips, where Micronic has a strong position. Write speed and high quality are Micronic's key competitive advantages in this market.

AFTER MARKET

The after market, consisting of service contracts, upgrades, add-on products and consulting services, is becoming an increasingly important part of Micronic's business in pace with expansion of the installed base. A smoothly functioning service organization is therefore vital for the entire company. In addition to the local service network, which is found close to the customers, Micronic has experts at the company's tech center in Japan, ATAC, and at the head office in Täby, Sweden.

Fundamental drivers for Micronic

Highlights of 2008

The photo shows the Prevision system's X-carriage guided by friction-free air bearings and carrying the pattern generator final optics.

Net sales reached SEK 569 million.
The operating loss was SEK 37 million.
The operating loss adjusted for capitalization and amortization of development costs was SEK 85 million.
Order intake amounted to SEK 378 million.
Gross margin was 28.4 percent.
Micronic shipped the first Prevision-10, a system that enables photomask writing for next-generation display manufacturing, G10.
Orders were received for two systems from the Sigma7500 series for the production of photomasks for the semiconductor industry.
The FPS5300 laser pattern generator was launched and is targeted for production of photomasks for advanced electronic packaging applications.
The property in Täby was sold and is being leased back.

FINANCIAL OVERVIEW
	2008	2007	2006	2005	2004	2003	2002
Net sales, SEK million	569	523	1,204	1,276	839	428	496
Gross margin, %	28.4	29.3	54.3	54.4	55.8	38.4	47.8
Operating profit/loss, SEK million	-37	-291	123	172	126	-194	-90
Operating margin, %	-6.6	-55.6	10.2	13.5	15.0	-45.3	-18.1
Adjusted operating margin, %	-15.0	-40.2	18.2	22.3	5.2	-86.0	-44.2
Order intake, including service, SEK million	378	634	604	1,306	945	1,086	459
Order backlog, December 31, SEK million	224	332	200	871	794	764	231
Earnings per share, before dilution, SEK	-0.78	-5.30	2.37	3.00	2.77	-5.59	-3.30
Earnings per share, after dilution, SEK	-0.78	-5.30	2.37	2.99	2.70	-5.59	-3.30
Average number of employees	398	416	462	415	359	312	299

This annual report is in all respects a translation of the Swedish annual report prepared in accordance with Swedish laws and regulations. In the event of any difference between this translation and the Swedish original, the Swedish annual report shall have precedence.

Order intake

Net sales and operating margin

Net sales in 2008 by geographical market

Net sales in 2008 by application

MICRONIC 2008

Comments by the CEO

The strength of Micronic's business lies in its offering of advanced display, semiconductor and electronic packaging products. Our pattern generators are based on a high technical content that creates added value for our customers, and their customers – in the form of both new features and lower production costs.

For many years, technological development in the electronics industry was fuelled by a need for new and more advanced functionality, but is today driven primarily by the push for lower costs and higher efficiency. Micronic works in a mature market that is fundamentally stable and expanding over time, but is highly cyclical. Like all markets, it has been impacted by the current climate of financial uncertainty and economic slowing.

In response to a changing market, we intensified the focus on profitability during 2008 and adjusted the management structure to optimize the business agility and efficiency. Because the after market is gaining importance, its organization was reinforced at the management level.

We believe that the need for cost-cutting among our customers will be a top priority, and therefore an incentive for new investments. For Micronic, which offers some of the world's most advanced pattern generators, this is both an adaptation to the prevailing market conditions and a confirmation of our already strong position. Micronic already has products ready for the next generation of both display and semiconductor photomasks, products that meet demand for lower photomask production costs. Our technological lead is also enabling us to cut back our R&D spending on existing products and free up resources for the development of products in new areas where we can diversify our business.

RESULTS FOR 2008

Net sales were up somewhat from the 2007 level and reached SEK 569 million. The operating loss was SEK 37 million, representing a significant improvement over 2007. We have taken measures to reduce personnel and consulting costs and at the beginning of 2009 downsized our total workforce by around 100 compared to the previous year. We sold the property in Täby, which gave us a strong balance despite the year's negative earnings. Cash and cash equivalents at December 31, 2008, totaled SEK 371 million. During the autumn we benefited from foreign exchange movements since our sales are denominated in Japanese yen and US dollars, two currencies that gained steeply against the Swedish krona.

DISPLAY MARKET

The FPD market in 2008 was characterized by massive investment in new production facilities and a continued rapid price fall in the consumer market. For pattern generators, the investment wave we expected to reach us in the second half of 2008 failed to materialize due to the financial crisis and resulted in production cut-backs in the industry. The orders we had anticipated were therefore pushed forward. However, this means that our customers have built up no additional production capacity for photomasks and that the capacity needed to meet demand remains to be delivered.

The market downturn could stimulate demand for the Prevision-10, our high margin product, by shifting planned investments from Generation 8 (G8) fabs to G10 and G11. The Prevision-10 enables writing of larger, more complex photomasks with high image quality, leading to improved flexibility, better yields and a reduced number of process steps, which are critical for cost-effective production of large format displays. This autumn, according to plan, we delivered the first Prevision-10 system for manufacturing of displays for G10.

SEMICONDUCTOR MARKET

Growth in the semiconductor market slowed during the year, partly due to economic conditions but also as a result of structural changes. Today the cost of designing chips at advanced technology nodes has accelerated sharply. One effect of this is that the industry has gone from primarily designing chips for the most advanced technology nodes to more varied IC production across an increasing range of nodes in order to achieve the lowest production costs. The photomask industry has been late in reacting to this structural change, leading to the build-up of excess production capacity for photomasks at the advanced nodes. Against this background, the pattern generator market shrank to around 10 systems in 2008. With the sale and delivery of two Sigma systems during the autumn, Micronic has significantly strengthened its market position.

In the future we believe that the market for pattern generators will be led more by the push for lower costs than by technological advances. Micronic's Sigma systems offer cost-efficiency combined with the best lithographical performance of any laser-based pattern generator on the market.

ELECTRONIC PACKAGING

Development in the electronic packaging market remains fast-paced, driven by powerful demand for wireless and portable consumer electronics with advanced features. In the closely related product area for manufacturing of PCBs, a less technologically complex process than that used for electronic packaging, there is a clear trend toward the use of Laser Direct Imaging (LDI). LDI could also be applied in electronic packaging applications, where it could offer valuable cost advantages.

MICRONIC 2008

In 2008 we evaluated the potential use of our unique and patented technology to broaden the existing product areas into a market with larger equipment volumes, which could also give us a more even revenue flow.

Micronic has the capacity to satisfy customer demand for more advanced products at investment levels that the industry can handle.

AFTER MARKET – INCREASED PROFITABILITY

The after market, consisting of service contracts, upgrades, add-on products and consulting services, is an increasingly important area of business for Micronic. Service contracts are a relatively stable source of revenue even in periods with low system sales. The availability of our systems is critical for our customers, which often have very short lead times. In the past year we succeeded in enhancing the uptime and stability in our systems, and therefore also their availability performance, which has also enabled us to increase our revenue from service contracts. Overall sales in the after market rose during the year and accounted for 42 percent of total sales.

To further accelerate growth in the after market, changes were made at the management level. The subsidiary president in South Korea was named SVP Customer Operation and a new subsidiary president for the important Japanese market was appointed.

IMPROVED PERFORMANCE MANAGEMENT

In 2008 we continued our efforts toward efficiency optimization and continuous improvement throughout the company and refined our steering processes and quality systems. The success of these efforts was proven when a major customer carried out an extensive quality audit of Micronic with excellent results.

Our human resources were prioritized and lifted to a strategic level through the appointment of a SVP Human Resources with global responsibility. Among other things, in the past year we strengthened the employee development process, further developed the leadership program and improved the alignment of employee goals with company objectives.

THE FUTURE

In 2008 we experienced both disappointments and the emergence of new opportunities. As a supplier to the global electronics market, we are accustomed to seeing sudden swings in demand. And although it is difficult to predict when demand for pattern generators will recover, our market is fundamentally sound and offers good earning potential.

I see several possibilities for Micronic. We already have technology and products in place to meet customer needs when the market revives, and are therefore able to cut back our R&D spending from a level of SEK 200 million to around SEK 150 million and shift our focus to development of a new product area. We have identified interesting potential in the market for electronic packaging, where we can expand our offering into a new market that is demanding products in larger volumes. We have a solid balance sheet and healthy liquidity that provide scope for product development while at the same time ensuring sustainability in these uncertain times.

Given the excellent earning capacity of our products, particularly in the display pattern generators, we find no reason to change our long-term goals. Our long-term operating margin target of 15 percent stands firm, alongside our gross margin target of at least 50 percent.

2009 will most likely be a year of uncertainty, but will also offer exciting new opportunities for Micronic.

Sven Löfquist
President and CEO

The Micronic share

The Micronic share has been listed on the stock exchange since March 2000 and since April 2008 on the NASDAQ OMX Nordic Exchange, Stockholm List, Small Cap, Information Technology. Micronic's share capital amounts to SEK 39.2 million and is divided between 39,166,616 shares of the same class, each of which carries one vote.

SHARE PRICE TREND IN 2008

The closing price of the Micronic share in 2008 was SEK 5.80, compared to SEK 32.20 at year-end 2007, a decrease of 82 percent. Over the same period, the SIX General Index fell by 42 percent and the Philadelphia Semiconductor Index SOX by 48 percent.

The year's highest bid price was quoted at SEK 34.40 on January 7 and the lowest at SEK 5.50 on December 29.

Micronic's market capitalization at the end of 2008 was SEK 227 million, down from SEK 1,261 million at year-end 2007.

TRADING AND LIQUIDITY

A total of 17.0 million (30.4) Micronic shares were traded in 2008 for a combined value of SEK 368 million (1,585). This corresponds to 43 percent (77) of the total number of shares in Micronic. The average daily trading volume was 67,279 shares (121,414), equal to an average daily value of SEK 1.5 million (6.3).

OWNERSHIP STRUCTURE

The number of shareholders at the end of the year was 5,657 (5,472). At year-end 2008 the 10 largest shareholders held 59.7 percent (59.6) of the total number of shares. The 100 largest shareholders held 77.6 (74.8) percent of the total number of shares.

At the end of 2008, 18.1 percent (13.5) of the shares were held by Swedish private investors, while 63 percent (86) were held by Swedish equity funds and institutions. Foreign investors held 19 percent (25) of the share capital and votes. The Board of Directors and executive management control a combined 0.1 percent (0.2) of the number of shares and votes.

The 2008 Annual General Meeting was held in Täby on April 3. More than 48 percent of the shareholders were represented at the meeting.

DIVIDEND POLICY

The Board of Directors and CEO propose that no dividend be paid for 2008, nor has the company paid dividends in earlier years. Micronic has instead reinvested the generated profits primarily to finance ongoing development activities and thereby create growth for the company.

EMPLOYEE STOCK OPTION PROGRAM

The Annual General Meeting of Micronic on March 29, 2007, resolved to approve an employee stock option program running from 2007 to 2012. Under the program Micronic may issue 1,540,000 warrants for subscription to shares, whereby the maximum dilutive effect is 4 percent. The share capital may be increased by no more than SEK 1,540,000.

The terms of the program have been drawn up in collaboration with the company's largest shareholders and have involved allocation to the employees in Sweden on three occasions, after the publication of the interim reports for the second, third and fourth quarters of 2007. The strike price is equal to 115 percent of the average market value on the ten trading days following publication of the respective quarterly reports and amounted to SEK 57, SEK 54 and SEK 34. The members of the executive management together hold 320,000 stock options. The terms of the program are also described in Note 13.

Ownership structure at December 31, 2008

Geographical spread of ownership at December 31, 2008

MICRONIC 2008

The Micronic share

SHARE DATA

Listing	NASDAQ OMX, Nordic Exchange
Industry classification	Small Cap, Information Technology
Sector	Electronic Equipment & Instruments
Ticker symbol	MICR
ISIN code	SE0000375115
Number of shares	39,166,616
Trading block	100 shares

MICRONIC'S TEN LARGEST SHAREHOLDERS AT DEC. 31, 2008

Shareholder	No. of shares	Holding, %
Catella Fonder	4,907,916	12.5
AMF Pension and Fonder	3,906,100	10.0
Fjärde AP-fonden	3,524,400	9.0
Alecta	3,175,000	8.1
Swedbank Robur Fonder	2,867,212	7.3
Morgan Stanley Fonder	1,933,704	4.9
Banco Fonder	1,144,000	2.9
Skandia Fonder	670,637	1.7
Skandia Liv	654,080	1.7
Pharos Invest	596,018	1.5
Total, ten largest shareholders	23,379,067	59.7
Others	15,787,549	40.3
Total number of shares outstanding	39,166,616	100.0

MICRONIC SHARE

OWNERSHIP STRUCTURE AT DEC. 31, 2008

Holding by size	No. of shareholders	No. of shares	%
1–500	3,380	673,156	1.7
501–1,000	1,001	880,443	2.2
1,001–5,000	894	2,239,869	5.7
5,001–10,000	162	1,263,718	3.2
10,001–50,000	139	3,114,629	8.0
50,001–100,000	23	1,606,214	4.1
100,001–	58	29,388,587	75.0
Total	5,657	39,166,616	100.0

ANALYSTS THAT CONTINUOUSLY MONITOR MICRONIC

Investment bank/Research company	Analysts
Carnegie	Daniel Djurberg
Handelsbanken Capital Markets	Fredrik Agardh
Kaupthing Bank	Mikael Laséen
Nordea	Mats Bergström
Redeye	Greger Johansson
Swedbank	Håkan Wranne

MICRONIC 2008

Micronic's markets

Micronic remains the market-leading supplier of pattern generators for display photomasks, and in the past year delivered the first Prevision-10 for next generation display manufacturing. In addition, the status of the Sigma7500 was confirmed as the laser-based tool of choice for the semiconductor industry. In the electronic packaging market, Micronic launched the new FPS5300 pattern generator and evaluated the potential to develop laser-based systems for direct writing.

Display market

In 2008 the flat panel display (FPD) market was characterized by massive investment in new production facilities and a continued rapid price fall in the consumer market. The main display application is the TV followed by desktop monitors, notebook PC and mobile phones. Looking forward, public displays for so-called digital signage and mini note PC displays are expected to be among fast growing applications.

Though CRT TVs still account for a large portion of the TV market in the number of units, FPDs now represent over 95 percent of the overall display market in terms of revenue. The sharp decline in FPD pricing will soon also make the FPD TV the preferred choice in developing countries.

FLAT PANEL DISPLAY PRODUCTION TECHNOLOGIES

Flat panels are divided into different categories based on the technology they represent. The predominant FPD technology is liquid crystal display (LCD), currently accounting for around 90 percent of total FPD revenue.

In an LCD, a single so-called backlight unit is used to light up all pixels. Each pixel consists of three sub-pixels (red, green and blue) that can be individually modulated to produce virtually any color. Most LCD manufacturers use around 10 photomasks when producing a liquid crystal display. Virtually all LCD photomasks worldwide are produced using pattern generators from Micronic.

Plasma Display Panels (PDP) account for around 10 percent of the FPD market. PDPs are offered as an alternative to LCD-TV for large sizes (> 40 inch).

In a PDP, each individual pixel generates its own light and color, but the PDP requires a relatively large amount of energy to emit light. Another issue with PDP technology is that it does not offer the resolution required for many applications. No advanced photomasks are needed when producing a PDP.

A display category that has gained considerable attention lately is the organic light emitting diode (OLED). An OLED display requires no backlight or color filter since each pixel generates light and color on demand. This makes the OLED panel relatively "green" in that it consumes much less energy than an LCD or PDP display. Another benefit of this technology is the ability to produce FPDs only a couple of millimeters thick with high image contrast.

Although the technology has been around for many years, mass-production of OLED displays is currently used only for handheld applications. Producing large displays and reaching the desired lifetime has proven more difficult than previously expected. Both issues are linked to the materials used in the OLED panel, and large investments in R&D are currently being made to overcome these hurdles. The OLED has the potential to become the super thin, low energy and low cost display of the future. Large high-precision photomasks will most probably be required to produce large OLED displays.

Possible future applications include flexible FPDs that are only a couple millimeters thick and have a relatively low production and material cost.

MARKET DRIVERS

Lower prices are key to stimulating demand and further expanding the total market in terms of units. The price decline is also

History and possible long-term future development of the display
Source: Display Bank, 2008

MICRONIC 2008

helping to shift demand toward larger panel sizes. In response to the worldwide economic downturn, most leading panel makers have cut back volumes on their existing production lines in order to avoid building up excess panel stock. Due to weaker demand and falling panel prices, the size of the LCD display panel market has been revised downwards to USD 103.4 billion in 2008 and USD 85.9 billion in 2009 (DisplaySearch, December 2008).

There is a continuing trend toward new generations of production facilities with larger glass substrates. An important milestone will be reached with Sharp's anticipated start-up of mass production on the world's first Generation 10 (G10) production line in 2009. Previously, the trend towards new display generations was fueled mainly by the increasing panel size, but lately production cost-efficiency has emerged as the main driver.

Display panel makers are also seeking other ways to lower their production costs, such as redesign of the most expensive components, programs to improve facility yields and a reduction in the number of production steps. This is stimulating demand for new and more advanced photomasks as new designs are introduced. Fewer production steps require fewer photomasks, but instead demand significantly more complex photomasks with longer write times. On the whole, the trend towards

fewer production steps is therefore positive for Micronic.

The large capacity investments among display makers during 2008 failed to filter down to the market for pattern generators as anticipated in the second half of the year and were pushed forward due to production cuts and postponed production starts in the wake of the global economic downturn. However, this means that no additional capacity for production of photomasks has been built up by the mask shops.

The investments required to build new facilities has led to a restructuring process among the panel makers as they aim to share cost. One such example is Sony, which manufactures LCD TVs in cooperation with Samsung. During 2008, Sony has also signed an agreement with Sharp to jointly operate the G10 factory currently under construction. In addition, Toshiba has signed an agreement to purchase around 40 percent of its LCD TV panels from Sharp.

Geographically, South Korea and Taiwan continue to dominate FPD production.

THE MARKET FOR DISPLAY MANUFACTURING EQUIPMENT

2008 was a record year for investments in display capital equipment and a total of USD 13.8 billion was spent, representing an increase of 71 percent compared to 2007

2006-2009 FPD revenue by application

Display equipment spending – history and forecast for the coming three years

Trend	Effect on Micronic
> Volume growth	> Increased basic demand for photomasks
> Price pressure	> Redesigns lead to demand for fewer, but more advanced photomasks (Prevision-8)
	> The new generation of production facilities requires larger and more advanced photomasks (Prevision-10)
> Better image quality	> Demand for high resolution pattern generators (Prevision-8 and 10)
> Higher production yield	> Demand for more complex pattern generators (Prevision-8 and 10)

MICRONIC 2008

(DisplaySearch, January 2009). Most panel makers have announced further plans for investment in new facilities, but given the current weak economic environment a number of these projects are being pushed forward in time.

MICRONIC IN THE DISPLAY MARKET

Micronic manufactures pattern generators that are used by mask shops to produce photomasks for delivery to display panel makers. Micronic's superior technology has earned its pattern generators a position as the industry standard for display applications. Micronic also manufactures measurement systems for advanced display mask metrology. At present, there are no competing systems for advanced LCD photomask production.

Micronic's range of display products is well positioned to benefit from a recovery in the market. The Prevision-8 is optimized for production of advanced photomasks through G8, while the Prevision-10 is designed to meet market requirements for high writing accuracy and productivity for the manufacturing of photomasks through G11. The Prevision platform offers significantly higher throughput than earlier pattern generators, and therefore also shorter delivery times to photomask users and increased capacity for photomask makers. In 2008 Micronic delivered the first Prevision-10 system to a customer.

MARKET OUTLOOK

Total spending on display capital equipment in 2009 is predicted to fall sharply to USD 6.9 billion and then bounce back to USD 9.0 billion in 2010 (DisplaySearch, January 2009). This dramatic anticipated drop in investment should be seen in light of the explosive capacity buildup in 2008 and the worldwide economic downturn in the second half of the year. Investments in display pattern generators were very low in 2008 but are expected to pick up at a relatively early stage of a market upswing, since the existing production capacity is operating at full capacity. The current market downturn could also stimulate demand for Micronic's Prevision-10 system as planned investments in older generation fabs are upgraded to more cost-effective Generation 10 and 11 (G10, G11) facilities.

Semiconductor market

Growth in the semiconductor market slowed markedly in the second half of the year. Sales of integrated circuits amounted to USD 212 billion in 2008, down by 2.7 percent for the full year compared to 2007 (VLSI Research, December 2008). Semiconductor equipment spending fell by 25 percent in 2008 and reached USD 41.6 billion.

The semiconductor industry has evolved through many technology generations, referred to as nodes. Following a trend known as Moore's Law, each node has led to a doubling in the number of transistors on a silicon chip every two years. However, in recent years the cost of designing chips at advanced technology nodes, i.e. 100 nm and below, has accelerated sharply, resulting in the release of fewer designs. One effect of this is that the industry has gone from primarily designing chips for the most advanced technology nodes to more varied IC production across an increasing range of nodes in order to optimize production costs for the respective application.

PHOTOMASK MARKET

While the photomask market was expected to contract by 11 percent in 2008, dropping to USD 2.7 billion (VLSI Research, December 2008), merchant mask shops had anticipated increased demand for advanced photomasks and expanded their capacity accordingly. However, a lower than expected volume of sub-100 nm chip designs has resulted in overcapacity at the leading edge and therefore also shrinking margins. In contrast, captive mask shops have not built up excess capacity to the same extent and can more easily capitalize on the superior cost-efficiency of laser pattern generators compared to electron-beam systems.

MICRONIC IN THE SEMICONDUCTOR MARKET

Because of the overcapacity situation in the merchant photomask market and limited demand from chip makers with captive mask shops, the pattern generator market has continued to shrink. Micronic's assessment is that the market in 2008 decreased

Trend	Effect on Micronic
Decreasing margins on advanced semiconductor chips	Driving cost-effective use of DUV mask patterning at the 90nm and 65nm technology nodes (Sigma7500)
Specifications for non-critical layers evolving beyond capability of mask writers currently in use	Emerging opportunities for DUV mask writing at the 45nm, 32nm and 22nm technology nodes (Sigma7500)
Retirement of e-beam pattern generators	Increased volume available for pattern generators that write simpler photomasks (Omega)
Rapid increase in number of chips requiring advanced electronic packaging	Demand for cost-effective lithographic tools

MICRONIC 2008

to around 10 systems. 2008 was the best year to date for Micronic's Sigma7500, with two systems ordered and shipped in the second half of the year.

Electron-beam systems are used to write the most critical layers in a mask set, while the Sigma7500 can write the majority of layers much more cost-effectively. NuFlare and JEOL manufacture e-beam tools, while Applied Materials continues to offer its existing laser products.

Due to the broadening of the semiconductor industry, there is a long "tail" of mature technology that is creating opportunities for Micronic's Omega6000 series of pattern generators.

MARKET OUTLOOK

Due to an anticipated drop in demand for consumer electronics in 2009, the semiconductor market is set to decrease by 10 percent. Spending on semiconductor capital equipment fell steeply in 2008, by 25 percent, and is projected to decline by a further 26 percent in 2009, although a recovery is awaited in 2010 (VLSI Research, December 2008). The photomask market was forecast to contract by 11 percent to USD 2.7 billion in 2008 (VLSI Research, December 2008). As a result, the market for pattern generators is expected to weaken during 2009 and the installed base to shrink as older equipment is successively phased out of production without being replaced.

The market for electronic packaging

Demand for portable wireless products with advanced features is the drivers behind continued growth in consumer electronics. A rising level of semiconductor complexity is generating a need for innovative technical solutions within electronic packaging. The challenge for the industry is to meet these technological requirements for miniaturization in electronic packaging without raising the costs for manufacturing and materials.

Electronic packaging is currently carried out in two stages. The first of these, known as Wafer Level Packaging (WLP) is performed on a silicon wafer before it is cut into individual components, and the second step on a microcircuit board, or so-called substrate. Today the interconnect patterns for packaging are created via traditional lithography using photomasks and exposure tools (aligners and steppers), consisting of older generation process equipment for semiconductors and printed circuit boards (PCBs). The trend toward shrinking features and increasing complexities will create stronger pressure on the current exposure tools.

Semiconductor chips mounted on a substrate.

EQUIPMENT MARKET FOR ELECTRONIC PACKAGING

The exposure tool market for electronic packaging is predicted to surpass USD 200 million annually. The market is divided between substrate manufacturing, with a market value of around USD 100–130 million (Micronic's assessment based on IC Package Report 2007, Japan Marketing Survey Co., LTD, 2007), and WLP, which is expected to exceed USD 100 million in 2011 (Yole Developpement, February, 2008).

In the manufacturing of printed circuit boards, a less technologically complex process than that used for electronic packaging, there is a clear trend toward the use of Laser Direct Imaging (LDI), i.e. direct imaging of interconnect patterns. Direct imaging can also be applied to electronic packaging, where it offers valuable cost advantages.

MICRONIC IN THE MARKET FOR ELECTRONIC PACKAGING

Through extensive market and technical studies in 2008, Micronic evaluated the possibilities for using its unique and patented technology to develop Laser Direct Imaging tools, LDI, for electronic packaging. Micronic sees clear potential in this market area and good opportunities to broaden the product offering into a new market that is demanding products in larger volumes.

In addition, Micronic will continue supporting the photomask sector for this market. In October 2008 Micronic introduced the FPS5300 pattern generator for packaging photomasks as a successor to the FPS5100. The FPS5300 is well positioned to meet future technology requirements and remains the most advanced system on the market.

Micronic's long-term strategic model

Micronic's long-term strategic model is designed to steer the company's business toward technological innovations offering strong growth and profitability. The focus in Micronic's offering is on meeting customer needs and the market's requirements on precision, quality, productivity and service.

The foundational elements of Micronic's operations are the vision, the mission and the long-term goal. The company's values, Lean Thinking principles and leadership profile govern the actions of the employees and the way their work is led and implemented in order to realize the established goals. The annual business planning process is shaped by these elements and is also based on the company's long-term assessments and plans. See Micronic's strategic model on page 11.

BUSINESS PLANNING PROCESS

To meet its business objectives, Micronic uses a planning process based on five perspectives: customers, operations, products, employees and finances. Every year, the strategic focus is reviewed and new goals are formulated for each perspective. External demands on the products and services from customers and the market are balanced against the internal capacity to develop, produce and deliver these.

CUSTOMERS

Micronic has an explicit customer focus and strives to meet the high expectations of its customers through disciplined execution at the highest operational speed. Fast time-to-market is essential in enabling customers to meet their own launch schedules.

OPERATIONS

Continuous improvement programs are carried out in development, purchasing, administration, production, installation and service to optimize efficiency and quality throughout the company. These improvements are ultimately aimed at increasing customer benefit and shareholder value.

PRODUCTS

Technological innovation is not only the backbone of Micronic's business but is also critical in satisfying customer needs and requirements. This innovative climate is fostered by close partnership with customers and an integrated approach to product development that spans across all functions in the company.

EMPLOYEES

Micronic is characterized by a high level of innovation and knowledge in a wide range of areas. Continuous development of employee expertise, in both breadth and depth, is decisive for the company's ability to meet customer requirements.

FINANCES

To ensure attainment of the company's long-term financial targets, all commercial opportunities must be weighed against the technical, market-based and financial risks. Through a high level of conscientiousness in financial control, continuous improvements are pursued to achieve higher efficiency and lower costs in products and execution.

MICRONIC'S VALUES

Micronic's values serve to strengthen the organization by providing guidelines for the conduct of all employees. Because Micronic is a global company with units in geographically widespread locations, it is vital that its work is steered by common values and that decisions are made on consistent grounds. Aside from creating a uniform identity, the values contribute to greater efficiency and support the decision-making process.

PROCESS FOR NEW BUSINESS OPPORTUNITIES

In order to meet the market's high demands on technological development, Micronic

Micronic's values

Micronic has defined four corporate values:

PUSHING THE LIMITS

We are always pushing the limits of current technologies. We are exploring new ideas for the future. In daily operation, we challenge our limit in every aspect and outperform where we were yesterday.

CAPTURING THE HEART OF THE CUSTOMER

We meet each customer's unique needs through lasting win-win partnerships that combine technology, teamwork and innovation.

TEAMWORK AND CLARITY

We build success through the contribution of each employee and collaborate with clear roles and responsibilities.

RESPECTFUL INTERACTION

We respect each other independent of gender, cultural or ethnic background.

MICRONIC 2008

Micronic's long-term strategic model

MICRONIC 2008

Micronic's strategic model

works according to Business Opportunity Pipeline, a process used to assess whether or not a product has realizable potential. In this way, developed technologies can be used both in existing products and as a platform for new products.

LEAN THINKING PRINCIPLES

Lean Thinking defines a set of principles and tools used by Micronic to develop and improve its competitiveness and profitability. Lean Thinking is a highly customer-driven approach that maximizes customer value while at the same time ensuring the use of effective methods and processes.

All of the principles relate to the customer relationship in different ways, such as:

Pull workflow – means that there must be a customer who demands, requires and is dependent on a certain result.
Go and see – means that an employee working in a certain process physically goes and studies the situation, for example by visiting the customer's environment or using benchmarking against operations similar to Micronic's in order to adopt best practice.
Cross-functional team – reduce the number of handovers, which saves time and resources in a workflow. One such example is development of the Prevision-10, where the lead time was shortened by 30 percent compared to the Prevision-8.

Lean Thinking also provides a number of methods based on principles to optimize efficiency throughout Micronic's organization. One such method is value stream mapping, which is used to identify which steps in a process add value, and which do not. The method is based on the principles of cross-functional teams, go and see, visualization and learning. Another method is Project Experience Review, which is aimed at capturing experience from one project and using it in another.

Micronic's operations and products

The manufacturing industry served by Micronic demands innovative products at the leading edge of technology, with high quality for stable and reliable production. Micronic's operations are also characterized by responsiveness to meet sudden changes in the market and satisfy strict customer requirements of short delivery times and reliable service.

MARKET AND SALES

Micronic's customers are found in a narrow group of high-tech companies. Because the products represent a sizeable investment for the customer, sales involve a large degree of personal customer contact. In addition to direct customer meetings, the products are marketed at a number of conferences and industry trade shows where it is also possible to reach photomask end-users.

This target group, the customers of Micronic's customers, is of major importance for marketing and future product needs.

In the past autumn, for the fourth consecutive year, Micronic held technical seminars in Japan, Taiwan, South Korea and China. At the seminars, Micronic presented its entire product portfolio and updated its customers and their customers about the latest technological advances. A new feature for the year was "round table meetings" with the participants for a joint discussion of challenges in the industry.

CUSTOMER-DRIVEN PRODUCT DEVELOPMENT

Close partnership with customers has always been a hallmark of Micronic's product development strategy. "Business Opportunity Pipeline" is a process used to ensure that the company is focused on developing the products and services demanded by customers, and that this is done with a reasonable level of risk that allows both short- and long-term profitability. Through this process, Micronic selects the products and services to be produced and sold.

When the company decides to realize a new product, this sets in motion an intensive process that relies on close collaboration between many different fields of expertise. The schedule is often

Best practice

In 2008 Micronic established a global program to acknowledge valuable contributions in the organization. As part of this initiative the company held a "Micronic Day" in September, an annual internal event to highlight the employees and their work. Awards for the best practice work methods were presented to four different teams that were represented by the following individuals.

Mats Ekberg

Successful writing of 3-dimensional structures "Through in-depth and far-reaching knowledge of pattern generation, photoresist and data manipulation, and with valuable assistance from our partners, we succeeded in writing a 3-dimensional photomask on a Micronic pattern generator that is designed for 2-dimensional fabrication."

Magnus Martinsson

Preventive service led to dramatically improved uptime "By prioritizing and visualizing problems, continuously building up the local expertise and underlining the value of preventive service at the customer site, we increased the uptime of the pattern generators by 14 percent in the span of six months."

Johan Colling

Faster development of loading module for the Prevision-10 "By employing cross-functional teamwork, better reuse of earlier designs and closer cooperation with our subcontractors, we were able to shorten the development cycle for the loading module in the Prevision-10."

Nina Skanse

Program to improve the quality and service life of lasers in the Sigma systems "By using visualization charts to show the status of lasers on customer sites, increased knowledge sharing and understanding through cross-functional teamwork and shorter decision-making paths, we managed to increase the uptime of the pattern generators, optimize production planning and extend the service life of the lasers by 180 percent."

MICRONIC 2008

Micronic's operations and products

aggressive, at the same time that many complex problems must be solved. In 2008 Micronic manufactured the first Prexision-10 laser pattern generator, an undertaking in which the key tactic was to work cross-functionally across different disciplines such as design, purchasing, production and service. The project flow was structured by systematically working through the product and design requirements. The project team used integration-driven development, structured verification and visualization for effective steering and communication. Above all, this strategy speeded up the process and resulted in higher precision in quality and delivery.

PRODUCTION OF COMPLEX SYSTEMS IN SMALL VOLUMES WITH HIGH QUALITY

When an order is received it is followed by production, which is broken down into planning, purchasing, assembly and setup. The manufacture of pattern generators, carried out at Micronic's facility in Täby, places stringent demands on the skill, precision and technical expertise of those who build and calibrate the systems. A pattern generator must be placed in a cleanroom during assembly of critical optics, calibration of sub-systems and testing of finished systems.

In the next phase, the installation department takes over responsibility for setup, calibration and acceptance testing. Once a system has been approved it is shipped to the customer, first by climate-controlled truck and then by airplane. Vibration, position and temperature sensors are enclosed within the shipment to ensure that the system is not exposed to potentially damaging conditions.

This is followed by setup at the customer's site, where the system is fine-tuned and

Patents and licensing

For a high-tech manufacturer like Micronic, it is of particular importance to protect the use of innovative new solutions in application areas and markets of expected future importance through patents and licensing agreements.

A decisive and long-term strategy for early identification and protection of innovations through a combination of patent applications and analysis of the intellectual property potential of its business models enables the company to steer its operations in the right direction.

At the end of 2008 Micronic had 186 patents registered in the USA, Asia and Europe, whereof 50 patents were granted during the year.

Organization

Micronic's operations are structured in a functional organization with joint R&D, manufacturing, marketing and sales for all products.

Micronic has its head office and departments for R&D, production and marketing in Täby, just outside Stockholm, and a strategic development unit in Gothenburg. Micronic has subsidiaries in Japan, South Korea and the USA whose role, aside from providing customer service and support, is to work closely with the Parent Company in activities such as marketing, sales and installation. Micronic has a small subsidiary in Taiwan and a local office in China. In both of these countries, Micronic also works via an agent.

In Japan Micronic has also opened the Asia Technical and Application Center – ATAC – to serve the entire Asian region.

An estimated 1.8 billion cell phone displays were manufactured in 2008. The photomasks needed to produce cell phone displays can be written using pattern generators from Micronic.

Source: DisplaySearch January, 2009

MICRONIC 2008

Sigma7500

Omega6080

FPSS300

final acceptance testing is carried out. After this, the system is integrated into the customer's production.

AFTER MARKET

The industry in which Micronic operates is highly demanding and its customers depend on a very high level of availability from their production systems. Close cooperation with the customers is vital in order to provide effective service but also to offer add-on products such as new features and/or enhanced performance.

The after market, consisting of service contracts, upgrades, add-on products and consulting services, is becoming an increasingly important part of Micronic's business in pace with growth in the installed base, which is leading to increased revenue from after market sales. Today the useful life of a Micronic system exceeds 10 years.

During the year Micronic continued to enhance efficiency in the service organization through a new concept, the "five success factors for service". This is based on several years of determined efforts in the service teams that have resulted in improved performance and received a very positive response from the customers. One trend is a continuous increase in uptimes by a rolling average of 1.5 percent. The new concept gives customers better service at the same time that Micronic can take a proactive approach, plan its activities and balance its resources more efficiently. It has also resulted in better methods for handling complex system problems. On the whole, the concept is a more cost-effective way of working.

MICRONIC GLOBAL COOPERATION

In order to facilitate global cooperation, in

2008 Micronic implemented an improved workflow model that is supported by a new case handling system. The anticipated results are faster customer response times and decreased administration. Additional workflow improvements will be made during 2009.

OPTIMIZED GLOBAL SPARE PARTS HANDLING

A fast supply of spare parts is extremely important for the customers, and very costly for the company. In 2008 Micronic therefore initiated a project, to be continued in 2009, to optimize spare parts inventories and ultimately reduce working capital. Access to spare parts will be improved and delivery times shortened.

CUSTOMER SUPPORT

In order to promote continuous improvement, Micronic's customer support activities are conducted according to three main objectives; Slim, Simple and Speed.

Slim – A new director for after market activities, based in Asia, was appointed in the spring to stimulate and accelerate business development and bring the management closer to the company's main markets in Asia. The organization and workflow have been adapted to best meet customer requirements. In the past year the customer support staff was reduced by 20 percent in response to the new market situation.

Simple – Customer focus, stronger profitability, increased sales of after market products and motivated employees are all strategic goals for customer support that will be achieved by striving for simplicity throughout the company. Simplicity is a key objective regardless of whether it

applies to high quality service, the development and provision of system upgrades or continuous efficiency improvements in Micronic's operations. This is facilitated by organizing customer support in three main areas; service, sales of after market products and operational support.

Speed – Greater responsibility for customer support will be assigned to the regional offices at the same time that regional expertise is reinforced. The global support processes have been updated and redeployed for additional speed and efficiency and systems aimed at optimizing customer support are now also in place. All of these factors will contribute to greater speed in operations.

AFTER MARKET OUTLOOK

Market development is relatively easy to predict, since the number of new service contracts corresponds to new system sales delayed by the warranty period, which is typically one year. Service contracts are a comparatively stable source of revenue even in periods with weaker system sales. Sales of add-on products, upgrades and consulting services are expected to grow in pace with a rising number of products and services, although these have been affected by a weak photomask market.

Micronic's operations and products

Prevision-10

LRS15000

MMS15000

MICRONIC'S PRODUCT PORTFOLIO

Micronic's product portfolio consists of pattern generators for photomasks in three application areas: displays, semiconductors and electronic packaging. The product range also includes a metrology system for display photomasks.

PATTERN GENERATORS FOR DISPLAY PHOTOMASKS

PREXISION AND LRS15000

The systems in the Prevision and LRS series are used to produce photomasks for flat panel TFT-LCD displays and color filters for these. Micronic's latest system, the Prevision-10, is capable of exposing photomasks up to 2000 mm with a 0.75 µm resolution for production up to Generation 11 (G11), which is used primarily for LCD TV. The Prevision-8 is designed for photomasks up to Generation-8 (G8). The systems based on the Prevision platform have a higher image quality than the earlier LRS series. The LRS15000 systems can write photomasks up to and including G8.

METROLOGY SYSTEMS FOR TFT-LCD PHOTOMASKS

MMS15000

The MMS15000 system is used to verify pattern placement accuracy (registration) on large area TFT-LCD photomasks. The system has a registration measurement accuracy of 90 nm, which makes it the most accurate on the market by far. The maximum photomask size is 1300 x 1500 mm.

PATTERN GENERATORS FOR SEMICONDUCTOR PHOTOMASKS

SIGMA7500

The Sigma7500 series consists of Deep Ultra Violet (DUV) optical pattern generators that are based on SLM technology, and offer a unique combination of high resolution and short write time. The system is designed for production of semiconductor photomasks at the advanced technology nodes. There are three system types, Sigma7500HT, Sigma7500HA and Sigma7500-II, which target the 90, 65 and 45 nm nodes respectively. The Sigma7500 is also used to manufacture the most advanced image sensors (CCD) and phase shifting photomasks.

OMEGA6800 AND OMEGA6080

The Omega6800 is a raster scan pattern generator with a very flexible architecture, enabling photomask manufacturers to achieve optimal quality and writing speed.

The Omega6800 is designed for volume production of semiconductor photomasks for the 130 nm technology node and above. Another application is production of photomasks for the image sensors found in camera phones and most digital cameras.

The Omega6080 is based on the same platform, but offers even higher productivity for lower end photomasks, at the 250 nm technology node and above, and for less advanced phase shifting photomasks.

PATTERN GENERATORS FOR ELECTRONIC PACKAGING PHOTOMASKS

FPS5300

The FPS5300 is a versatile pattern generator made to handle large area photomasks for precision applications up to 1100 x 1100 mm. The system is designed to deliver optimum flexibility, productivity and stability. Flexibility is particularly important since customers in this market use pattern generators for a wide range of applications, including advanced electronic packaging, image sensors and simpler displays.

DISPLAY PRODUCTS

System	Application	Resolution/Generation
Prevision-10	TFT-LCD	0.75 µm/G11
Prevision-8	TFT-LCD	0.75 µm/G8
LRS15000-TFT3	TFT-LCD	0.75 µm/G8
LRS15000-TFT2	TFT-LCD	1.5 µm/G8
MMS15000	Registration measurement of display photomasks

SEMICONDUCTOR PRODUCTS

System	Application	Technology node
Sigma7500-II	Semiconductor	≥ 45 nanometer
Sigma7500HA	Semiconductor	≥ 65 nanometer
Sigma7500HT	Semiconductor	≥ 90 nanometer
Omega6800	Semiconductor	≥ 130 nanometer
Omega6080	Semiconductor	≥ 250 nanometer

PRODUCTS FOR ELECTRONIC PACKAGING

System	Application	Max. photomask size
FPS5300	Electronic packaging	1100 x 1100 mm

MICRONIC 2008

Micronic's employees, environment and society

A number of important initiatives were taken in the HR function during 2008. The company systematized and globalized its processes, a greater emphasis was placed on the individual and the goal-setting process was strengthened. Efforts to ensure safety and well-being at work were continued and environmental activities were focused on reduced energy usage.

Close to a third of Micronic's employees work in R&D in order to meet the electronic industry's rigorous requirements. The level of innovation is high and the company has in-depth expertise in a number of disciplines. Micronic has longstanding experience of marketing, sales and service adapted to the markets where its customers operate. Micronic sees it as a valuable asset to have employees with varying backgrounds and experiences, and the Parent Company alone has staff from more than 15 different countries. Micronic is learning-oriented and uses continuous renewal as a vital tool for organizational development.

To prepare the company for future challenges, a new SVP Human Resources was appointed at the beginning of 2008 and is a member of the Executive Management Team. The objectives for HR activities were:

To systematize the HR processes.
To increase clarity – the individual goals were charted and tied to the company's business goals.
To globalize the company – greater interplay between all areas of Micronic's operations.

PROCESS FOR PERSONAL DEVELOPMENT

To increase the focus on the individual's abilities and potential, Micronic has developed a process for personnel development, the Employee Development Process (EDP). EDP consists of a more far-reaching performance review with an emphasis on individual goals. The assessment of employee performance takes into account not only what has been achieved, but also how this work was carried out. During the year an EDP test was conducted among all managers, both in Sweden and abroad. This was followed by an evaluation and starting in 2009 the process will be launched on a full scale to include all employees.

LEADERSHIP PROGRAM

In the past year Micronic also enhanced its leadership program. Both newly appointed and experienced managers have access to

Reward & recognition

In 2008 Micronic established a program to acknowledge and reward valuable contributions in the organization. As part of this initiative the company held a "Micronic Day" in September, an annual internal event to highlight the employees and their work.

Awards were presented in three categories: Ylva Mjöberg-Wentzel, Manager R&D Mechanics, was named Leader of the Year. Tomas Söderlund, Manager Display Support and Henrik Åkesson, Manager Technical Account were winners in the Customer Focus category.

Peter Bovin and Krister Högdin, IT Support, were recognized for Achievement of the Year for their work with the company's values.

MICRONIC 2008

external coaching for assistance in fine-tuning their management skills. The individual leadership profiles and results of the employee survey in 2007 served as a basis for evaluation and ongoing development.

Micronic's leadership profile is based on a common platform and a holistic approach to leadership, and is a source of guidance and support for managers in their professional roles.

MICRONIC'S VALUES

Micronic's corporate values were revised in 2007 and the values were further refined during 2008. The performance assessment also includes employee attitudes and behavior. Follow-up via the EDP will be introduced to monitor that work is being performed according to these values.

SKILLS DEVELOPMENT AND KNOWLEDGE SHARING

The professional expertise and development of employees is a key success factor for Micronic, and the company's long-term need for competency in various areas provides a framework for career paths. Skills enhancement initiatives are taken to ensure a high level of proficiency in the company's core business. To create and uphold a creative and innovative climate, Micronic carries out knowledge transfer sharing such as weekly seminars where speakers take up different topics.

NUMBER OF EMPLOYEES

In 2008 the number of employees in the Parent Company decreased by 56. This took place through both normal attrition and voluntary exit offers. The number of consultants was reduced by around 40. The total number of employees in the Group at year-end 2008 was 357.

HR ACTIVITIES IN 2009

Implement the EDP process on a full scale globally
Continue the internal globalization efforts through increased knowledge sharing and communication and establish an efficiency process for strategic management by objectives
Establish a talent management program that includes all of Micronic's operations
Implement a global responsibility and management system

SALARY AND BENEFITS FOR EMPLOYEES IN SWEDEN

Micronic's salary adjustment policy is individualized and differentiated on the basis of expertise, skill, performance and the level of difficulty in the job. All employees in the Group are covered by a variable salary program that is based partly on individual or group targets, and partly on Micronic's profit targets. To ensure a systematic approach to the company's payroll structure and salary mapping, Micronic uses performance evaluation tools such as BAS and in the future will also use EDP.

Micronic has an equality policy. In the Swedish operations this means, among other things, that the company provides loss of earnings compensation to employees on parental leave for up to six months per child. The salary mapping carried out in 2008 shows that from an equality perspective, salaries in the company were set in a satisfactory manner. Employees in Sweden are offered a fitness allowance.

HEALTH INDEX

Employee turnover in 2008 was 15 percent, compared to 13 percent in 2007. The year's sickness absence at Micronic in Sweden was 1.73 percent, of which 0.87 percent was short-term.

OCCUPATIONAL HEALTH AND SAFETY

Micronic works according to an occupational health and safety policy which states that a focus on OHS must permeate all operations. The company works systematically and proactively to create the best possible social environment and safest possible working conditions.

Aside from incident reporting, there is a process that begins with OHS inspections

Level of education in Sweden
64 percent of the employees in Sweden have a university or college degree, several at the doctorate level.

Employees in Sweden by age category
The average age at Micronic is 44 years.

Employees in the Group by geographical area
The number of employees in the Group at year-end 2008 was 357, of whom 19 percent were women.

Employees in the Group by function
Close to a third of the employees work in R&D.

MICRONIC 2008

where violations and problems are taken up. These problems are logged and addressed according to a prioritization ladder that steers continuous improvements in the work environment, for which the group managers oversee implementation. The OHS committee meets once a month and plays a preventive and supervisory role in monitoring the implementation of decided actions. Occupational health and safety is also a standing item on the agenda of weekly executive management meetings. Occupational safety courses are carried out continuously at the head office. A few minor incidents occurred during the year but led to no occupational injuries.

Quality policy

For Micronic, quality means exceeding the expectations of our external and internal customers.
We always do our utmost to deliver innovative products and services on time and with the highest quality.
We strive to meet our objectives at the highest operational speed through lean thinking, responsiveness and a commitment to quality.

Environmental impact at Micronic's head office

system. The goals for the system are to increase organizational efficiency, support the employees in their day-to-day work and further improve product quality.

Improvement measures are carried out in close cooperation with customers for whom Micronic, as a supplier, must live up to exacting requirements. Micronic strives to systematically base its improvement decisions on measurable targets and trend analyses. The quality management system is formulated according to relevant standards. For example, the industry organization SEMATECH has established the Performance-Based Equipment Training method for the semiconductor industry, to ensure high quality and effectiveness in equipment training. Micronic applies this standard in the training and certification of service and installation personnel.

ETHICS

In the ethical area, Micronic's value "Respectful interaction" stands for respect for others regardless of gender, cultural differences or ethnic background. To establish this value at the global level, all employees in the Group took part in simulation exercises during 2008 to learn how these values can be applied in real life situations.

ENVIRONMENT

Micronic conducts no operations requiring environmental reporting according to the environmental authorities, aside from the use of coolants in the company's air conditioning system. Nor is Micronic subject to the EU directive on producer responsibility for Waste Electrical and Electronic Equipment (WEEE) or restrictions on the use of hazardous substances (RoHS).

Environmental compliance in product development is based among other things on use of the industry standard SEMI S2 for semiconductor manufacturing equipment, which contains guidelines for environmental, health and safety aspects throughout the product life cycle. Micronic was previously audited according to this standard and approved by a third party.

POLICY AND ORGANIZATION

Although Micronic has no particular environmental effects as a manufacturing company, there is a explicit long-term objective to minimize the company's environmental impact. As part of this undertaking, Micronic has an environmental policy that expresses the company's ambition to actively promote sustainable development and take responsibility for its employees, products and environment. Micronic's environmental manager

MICRONIC 2008

overseas issues related to environmental management and OHS.

Information is spread to the employees and environmental issues are taken up as part of the introductory course for all new staff. Via the company intranet, Micronic spreads information about environmental issues such as current environmentally-related projects, environmental performance indicators and instructions for pre-sorting of waste by type.

MICRONIC'S ENVIRONMENTAL IMPACT

Because Micronic's most significant environmental impact is found in the energy area, the year's efforts were focused on reducing this environmental impact as far as possible. Parallel to this, the company continued with the Implementation & Application phase in which the goal is to apply the relevant requirements in the ISO 14001 standard. This consists of regularly updating key data and analyzing trends in raw material consumption, energy usage, transports, chemicals and waste.

The greatest environmental impact factors in Micronic's operations are:

Energy usage
Purchasing of products, materials, chemicals and services
Transports
Use of developer and other chemicals

ENERGY-EFFICIENCY INITIATIVES

Geothermal heating and cooling

In the past year Micronic invested in a geothermal heating and cooling system that will heat the Täby property in the winter, cool the premises in the summer, dehumidify the air in the cleanrooms and cool down the pattern generators when they are used. As a result of this investment, the oil-fired boilers will be used only on very cold winter days. The system will save at least 150 cubic meters of fuel oil and thereby reduce CO2 emissions by 450 tonnes annually. This is by far the largest environmental investment ever made by Micronic, and has been transferred to the buyer in connection with the property sale.

Recovery of surplus heat

Micronic's distribution unit in Täby requires access to an ice-free loading dock at the factory. This loading dock was previously heated electrically, but a new solution has now been created in which it is warmed with waste heat from the air compressor during the winter. The solution costs nothing in terms of energy supply or environmental impact.

Reduced use of chemicals

The trays used in development of photomasks have been sized according to need, leading to reduced usage of process chemicals for development and etching.

ONGOING ENVIRONMENTAL ACTIVITIES IN 2009

Micronic will continue its energy-efficiency initiatives, which have proven to be both profitable and environmentally sound.

ENVIRONMENTAL WORK OF MICRONIC'S SUBCONTRACTORS

Micronic's products consist of more than 4,000 articles. The company is working continuously to formulate purchasing principles that lead to faster and more reliable deliveries and to reduce the number of "preferred suppliers" from previously 350 to around 110. These preferred suppliers account for around 86 percent of the purchasing value, and efforts are underway to sign purchasing agreements with these that contain paragraphs on environmental systems in compliance with ISO 14001 as well as ethics and occupational health and safety.

Most of the suppliers are located in Sweden (accounting for around 85 percent of the total product weight), and the rest are in Europe, the USA and Japan. However, Micronic has no real leverage to influence the environmental work of its suppliers due to the small volumes involved. Instead, and at some delay, the drivers come from the major display and semiconductor manufacturers.

Environmental policy

With consideration to the environment, the employees and the customers, Micronic actively promotes the creation of an environmentally sustainable society by pursuing the following objectives:

> Micronic shall strive to conduct its operations in the most resource- and energy-efficient manner possible, with continuous improvement as its guiding principle.
> Micronic shall minimize the environmental impact arising as a result of its operations through environmental training of the company's employees.
> The products developed, applied and marketed by Micronic shall give rise to a minimum of environmental impact throughout their product life cycle.
> Micronic shall inspire and encourage its external business partners to comply with and respect international environmental laws and regulations.

MICRONIC 2008

Micronic's technology

For a high-tech company like Micronic, cutting-edge expertise is critical for the delivery of new features and products to a market that continuously demands technological development. A few of the areas where Micronic conducts advanced technological development are lithography, writing engine technology, high-speed computing and substrate handling.

PHOTOMASKS AND MICROLITHOGRAPHY

Micronic's pattern generators are tools that are used to write microscopic images onto photomasks, which then function as templates for mass production of displays,

integrated circuits and electronic packaging.

The manufacturing process, called microlithography, is similar to the way in which photographs are reproduced with the help of a negative. By the same principle,

photomasks are used to optically transfer patterns onto a silicon wafer or glass plate for the production of semiconductor chips or displays. Each display or chip has an associated "mask set" of as many photomasks

MICROLITHOGRAPHY IS THE LINK BETWEEN DESIGN AND MASS PRODUCTION

The pattern layout is created using a CAD system. This data is then transferred to the laser pattern generator where it is converted into a suitable format for writing.
The photomask blank is then exposed by controlling a laser beam according to the pattern data.
Display: The pattern is projected in a so-called aligner on a scale of 1:1 onto the TFT-LCD substrate. This process normally requires between four and nine different photomasks.

Semiconductor: After processing, the photomask is used in a lithographic exposure system, a stepper, where the pattern is transferred to a silicon wafer. The pattern size is reduced four times in the stepper. After exposure the wafer is processed to form the transistors and conductors. The process is repeated 20–40 times with a different photomask each time.

Display: The display is assembled.

Semiconductor: When the microchip is finished, it is tested and packaged.
5. The electronic components are ready to be mounted in electronic equipment such as laptop computers.

MICRONIC 2008

as it has layers. A flat panel display can have up to nine layers, and an advanced semiconductor as many as 40.

The photomask is made from a substrate, normally a quartz plate covered with a thin layer of chrome and photoresist, a light-sensitive material. A pattern generator is used to expose the photoresist, after which the photomask is developed and etched.

DIFFERENT EXPOSURE TECHNOLOGIES

Micronic's systems employ laser-based patterning technology to write photomasks. All display photomasks are manufactured using laser pattern generators, while both laser and electron beam (e-beam) systems are used for semiconductor.

While laser-based systems can be used for most semiconductor photomask layers, certain layers in a chip require photomasks written with e-beam technology. The dominating process for the most advanced semiconductor photomask layers is an e-beam technology called Variable Shaped Beam (VSB). A VSB system divides the pattern into very small rectangles that are individually exposed with an electron beam. While this photomask-writing process offers high resolution and accuracy, it has some disadvantages – limited throughput and unpredictable write time. Today it takes up to 10 hours to print a single advanced photomask with a VSB system.

Micronic's laser-based Sigma systems can produce the same photomask in one-third or one-fourth the time with nearly the same pattern resolution.

TECHNOLOGICAL ADVANCES IN 2008

Research and development activities in 2008 were focused mainly on completing new products, enhancing the performance of existing ones and further improving the production stability of Micronic's systems. Parallel to development of existing products, Micronic is also studying future solutions in its core technology areas.

Simplified image showing the main components of a TFT-LCD. Photomasks are required to produce electrodes and the color filter.

PREXISION-10

The development of a next generation display pattern generator – the Prexision-10 – continued in 2008 and resulted in the first shipment to a customer. The Prexision-10 is designed to meet the extreme requirements for photomasks through Generation 10 (G10) LCD production. The Prexision-10 represents an upscaling of 50 percent compared to the Prexision-8. Over this larger surface, the Prexision-10 meets equal or stricter precision requirements on mura performance, placement accuracy and image quality than photomasks for G8.

From the Prexision-8 to Prexision-10 the photomask size expands from 1400 x 1620 mm to 1700 x 2000 mm, equal to an increase of 23 percent in length and 50 percent in surface area. The photomask size is optimized to fit multiple displays. G8 LCD plants are optimized for a display size of around 40", while G10 plants are built for efficient production of displays up to around 70". G10 is also aimed at producing 40" displays with greater efficiency than G8 through economies of scale.

The technology used in displays for both generations is largely similar, although the value of a G10 photomask is higher due to its larger size. The raw material for a photomask alone costs more than SEK 1 million before patterning and other processing. A display consists of a color filter panel and a TFT panel that make up the front and back, with a layer of liquid crystal material (LCD) between (see illustration). A complete mask set for production of a TFT panel consists of 4-6 photomasks and a similar number is used to make the color filter. The increased size and value of the photomasks result in higher demands on performance and stability in the Prexision-10.

To minimize lead times for a complete mask set, production stability must be exceptionally high. Production stability is mainly determined by two factors; performance margins and equipment stability. Performance margins in a pattern generator create tolerances for process variations in both the mask shop and display manufacturing. In view of the short lead times and high raw material costs, system stability is vital in avoiding costly rejects.

The single most critical parameter for the customers relates to mura, a Japanese term used to describe irregularities or systematic errors in displays. The errors are often so small that measurement is difficult or impractical, although they are visible to the human eye. Micronic has extensive knowledge and experience in this area. To meet requirements, the system must be capable of writing with sub-10 nm precision across a surface of 1700 x 2000 mm.

To satisfy all the new requirements, most of the system's components have been engineered and specially developed by Micronic. A few of the most critical enhanced or newly designed sub-systems for the Prexision-10 are:

Datapath – A modern in-house designed cluster computer architecture that combines increased customer value with lower production costs. Customers can preview all photomask patterns before writing, making it possible to eliminate rejects caused by operator errors. The datapath is also able to handle the growing CAD data volumes for larger displays. Micronic plans to introduce the cluster computer architecture in several of its products over the next few years.

Climate chamber – Micronic's know-how in climate control has made it possible to upscale the regulated air volume with sustained high performance. Temperature variations and gradients are particularly devastating for long-term stability, which is increasingly important in pace with expanding photomask sizes.

Zerodur stage – the photomask is placed on Micronic's unique Zerodur writing stage. Zerodur is a glass ceramic with extremely stable thermal properties. Over the course of several years, Micronic has developed in-depth expertise in processing with micrometer flatness Zerodur surfaces, which have now been scaled up to 1700 x 2000 mm. Without Zerodur and climate control it is not possible to meet the positioning requirements for G8 and G10 photomasks. This is especially critical for the most advanced photomasks, so-called

Half Tone Masks (HTM). HTM photomasks are created by writing twice on the same photomask with separate process steps between. The two layers must then be aligned within a few 100 nm, which in reality demands long-term stability at a fraction of that over a period of several days. Today HTM is the technology of choice to reduce the number of photomask process steps from 5–6 to 4–5 in volume production, but on the other hand requires double patterning of certain photomasks. HTM has been the key driver for improved performance in the Prexision-8 and Prexision-10, and at the same time offers the possibility for valuable cost reductions in volume production of displays through elimination of process steps requiring photomasks.

Milou – is an adapted diagnostic architecture for rapid troubleshooting and continuous monitoring of Micronic's products. Milou is an important step in the ongoing development of diagnostics needed to meet increasingly stringent customer demands on production stability. With a customer's consent, Milou can also be used for remote diagnostics.

The Prexision-10 has been created within the framework of Micronic's lean product development methodology. Cross-functional teamwork between product management, product development, purchasing and production has been especially critical in shortening the development time for the Prexision-10 by 30 percent compared to the Prexision-8.

FPS5300

In the electronic packaging area, customer requirements on pattern generator resolution were raised further. A number of smaller applications require sub-micron resolution, which is provided by the FPS5300. The FPS5300 is a further development of the FPS5100.

By inheriting technology from display and semiconductor pattern generators it has been possible to increase resolution in the FPS platform on par with customer requirements. The FPS platform shares

optical technology with the LRS, Prevision and Omega platforms.

AFTER MARKET PRODUCTS

Growth in after market sales is a strategic goal for Micronic, which developed a number of new products for the after market during 2008. A common denominator for several optional functions is that they address application problems that are not directly related to Micronic's pattern generators.

GalaxyExpress99 (GE99) – is an upgrade kit for LRS systems designed to meet the yield requirements for production at G8. GE99 has been developed in close cooperation with a leading customer.

Z-correction – is an optional function that enables customers to achieve significantly higher positioning accuracy in already installed pattern generators by compensating for registration errors originating from flatness variations in the mask substrate. Z-correction can also be used in combination with Micronic's MMS metrology systems.

CD-mapping – is a similar function that helps customers to compensate for systematic variations in linewidth uniformity across large photomasks resulting from errors in other process steps.

FUTURE STUDIES

To maintain its position at the leading edge of technology and continue meeting customer requirements, Micronic invests in future studies. The studies in 2008 were focused primarily on new writing engines. The writing engine is the heart of a pattern generator and similar equipment, and is the sub-system in which the optical image is generated. In 2008 Micronic enhanced its writing engine for display applications – the Acousto Optic Deflector (AOD) – to enable two times higher pixel speed.

Micronic has also performed studies on alternative writing engines with significantly higher pixel rates, mainly with a view to future direct writing applications. Direct writing demands at least 10 times higher pixel rate, often without sacrificing image quality.

MICRONIC 2008

Micronic's technology

Raster scan technology

The majority of Micronic's display systems utilize a laser-based raster scan technology. The Prexision, LRS and FPS systems, used in the production of display photomasks and advanced electronic packaging, operate on large photomask blanks. The largest currently in production are 1220×1400 mm and even larger will be used in the next generation of display manufacturing.

The photomask is placed on a stage that moves in one direction. When the stage is moving, a laser beam controlled by an acousto-optic deflector sweeps perpendicular to the direction of movement on the stage, creating a scan strip on the photomask. The process is repeated until the entire pattern area has been covered.

Micronic's Omega series is used for semiconductor photomasks that are significantly smaller, normally 5×5 or 6×6 inches. The Omega systems have a fixed optical head and an XY-stage that can move in two dimensions. In other respects, the Omega family uses the same writing principle as the Prexision, LRS and FPS systems.

SLM technology

Micronic's Sigma systems are designed for production of advanced semiconductor photomasks. Instead of writing with a limited number of laser beams, as in raster scan technology, the Sigma systems use a high-frequency pulsed laser and an SLM (Spatial Light Modulator) chip, a micromechanical device with one million individually controllable mirrors.

The laser illuminates the entire SLM chip, which reflects a small section of the pattern onto the photomask with each laser pulse. The pattern on the SLM chip changes between every laser pulse and since the photomask moves continuously, the pattern on the photomask is built up rapidly.

The reflecting mirrors enable pattern generation with a short wavelength laser, resulting in very high resolution. This is a critical capability, due to the ongoing push to smaller features on semiconductor photomasks. The SLM technology gives Micronic a unique combination of speed and resolution that can support customer requirements for many technology generations into the future.

MICRONIC 2008

Corporate governance report

The principles for corporate governance are essential in ensuring that companies are managed in an efficient and controlled manner. Corporate governance at Micronic is aimed at creating the conditions for a strong and active ownership, establishing a clear division of roles and responsibilities between the management and control organs and ensuring transparency towards shareholders, the capital markets and other stakeholders.

CORPORATE GOVERNANCE AT MICRONIC

Corporate governance in Micronic is regulated by Swedish law, such as the Swedish Companies Act, the Swedish Code of Corporate Governance and the listing agreement with the Nasdaq OMX Nordic Exchange in Stockholm. Since July 1, 2005, the Swedish Code of Corporate Governance (the Code) is included in the regulatory framework for the Nordic Exchange in Stockholm. Micronic, which has complied with the Code since its inception, continuously monitors developments in the corporate governance area and adapts its corporate governance principles to create added value for the shareholders and other stakeholders through timely and transparent information, efficient management and board work and effective control bodies. A revised Code of Corporate Governance is applicable as of July 1, 2008. The Swedish Corporate Governance Board was set up to monitor and develop the Swedish Code of Corporate Governance. For more information about the Code, visit the website www.bolags-styrningskollegiet.se

DEVIATIONS FROM THE CODE

Micronic complies with the Code with one exception. According to the Code, the names of all nomination committee members, together with the names of the shareholders they represent, must be made public no later than six months prior to the AGM. Micronic announced the composition of the nomination committee on October 17, 2008, i.e. just over five months prior to the AGM. The explanation for this deviation is that Micronic has chosen to maintain the tradition of holding the AGM early in the year. Since the nomination committee cannot be appointed before the month of October (must be appointed after the end of September), it is not possible to announce its composition earlier.

EXAMINATION BY THE AUDITORS

The corporate governance report and the board's report on internal control have not been examined by the company's auditors.

GENERAL MEETING OF SHAREHOLDERS

Pursuant to the provisions in the Swedish Companies Act, the general meeting of shareholders is the company's highest decision-making body. The responsibilities of the Annual General Meeting, the AGM, include adoption of the profit and loss account and balance sheet, election of board members and auditors, determination of fees and the transaction of other business as required by law or the Code. Significant decisions passed at general meetings are published through a press release immediately following the meeting and the meeting minutes are published on the company's website.

2008 AGM

The 2008 AGM was held on April 3, 2008 in Täby. More than 48 percent of the votes were represented at the meeting.

2009 AGM

The 2009 AGM will be held on Wednesday, April 1, 2009, 5 p.m., in the Galleriet conference room at Näsby Slott, Djursholmsvagen 30, in Täby. No later than four weeks prior to AGM, a notice to attend the AGM will be published in Post-Inrikes Tidningar and Svenska Dagbladet and will be posted on Micronic's website www.micronic.se.

NOMINATION COMMITTEE

The nomination committee represents the company's shareholders and its tasks are to evaluate and recommend candidates for nomination as Chairman of the AGM, Board Chairman, directors and auditors for election by the AGM. The committee's responsibilities also include recommendations on remuneration to directors, board committee members and auditors. By decision of Micronic's 2005 AGM, the nomination committee consists of the board chairman and four members representing the four largest shareholders on September 30. This applies until such time that the AGM decides differently. No remuneration is required.

COMPOSITION OF THE NOMINATION COMMITTEE
	Representing	Holding at September 30, 2008
Ulf Strömsten	Catella	12%
Anders Ljungqvist	AMF	10%
Annika Andersson	Fjärde AP-fonden	9%
Ramsay Brufer	Alecta	8%
Christer Elmehagen	Chairman of Micronic	–

Attendance at recent AGMs

MICRONIC 2008

tion is payable for work on the nomination committee.

All shareholders are given the opportunity to recommend board candidates for evaluation by the nomination committee within the framework of its duties. The nomination has held several meetings ahead of the 2009 AGM and has maintained regular informal contact. As a basis for its recommendations, the nomination committee determines whether the sitting board members have the requisite skills and characteristics in view of the company's position and future direction. In addition, the committee formulates the qualifications for any new directors that need to be recruited according to this assessment, and carries out a systematic procedure for seeking candidates for vacant board seats, with consideration to any recommendations submitted by the shareholders. The committee then nominates candidates for election to the board and presents its recommendations in the notice of the coming AGM and on Micronic's website. The nomination committee presents a report on its work at the AGM.

The company's auditors are appointed every four years. The audit committee assists the nomination committee in preparing recommendations for nomination of auditors and fees for audit work. The current auditors were elected by the 2006 AGM.

BOARD OF DIRECTORS

The board of directors consists of seven members, including the CEO. The 2008 AGM re-elected six members and newly elected Christer Elmehangen, who was also appointed Chairman. Göran Malm was appointed Vice Chairman. Christer Zetterberg declined re-election.

The composition of the board and the independent status of the directors in relation to the company, its management and major shareholders are shown in the table on page 26. The responsibilities of the board are prescribed by the Swedish Companies Act, but its work is also regulated by the Code and by the procedural plan that is adopted yearly by the board. The procedural plan defines the division of responsibilities between the board and its committees and between the board and the CEO, as well as establishing the framework for financial reporting. According to the procedural plan, the tasks of the board include:

Formulation of a long-term strategy and the related business plan and budget, as well as approval and adoption of the annual report and other public reports, interim reports, important policies and authorization instructions
Appointment of the CEO and evaluation of the CEO's performance.
Adoption of rules for internal control, annual follow-up of the effectiveness of internal control and assessment of the adequacy of internal control over financial reporting.
Decisions regarding major investments.
Decisions regarding far-reaching agreements.
Determination of the procedures and focus for the board's work, for example through the appointment of an audit committee and remuneration committee and through evaluation of board performance.
Annual follow-up of compliance with the guidelines for remuneration to senior executives adopted by the AGM.
Annual recommendation of remuneration guidelines to the AGM.

BOARD CHAIRMAN

The Chairman is responsible for overseeing that the board discharges its responsibilities in accordance with the Swedish Companies Act, the Code and the procedural plan. Through ongoing contact with the CEO, the Chairman monitors the company's development and ensures that the board is continuously provided with the information required to perform its duties. The Chairman also represents the company in matters related to shareholder issues.

At the 2008 AGM, Christer Elmehagen was appointed Chairman.

In 1965 there were only 50 transistors on the most complex ICs. Today the number of transistors on an advanced microprocessor chip is approaching 2 billion.

Source: Intel Corporation

MICRONIC 2008

BOARD REMUNERATION

The 2008 AGM resolved that board fees for the period until the end of the next AGM would be paid in a total amount of SEK 1,575,000, of which SEK 500,000 would be paid to the Chairman, SEK 275,000 to the Vice Chairman and SEK 200,000 to each of the other board members not employed by the company. Furthermore, the AGM resolved that total remuneration to the members of the board committees would amount to no more than SEK 350,000, to be paid in an amount of SEK 50,000 per member and committee assignment.

BOARD ACTIVITIES

In 2008 the board held 10 meetings, of which one was a statutory meeting in connection with the AGM. The minutes from these meetings are decision minutes and are recorded by the company's CFO. In order to achieve greater efficiency and depth in its treatment of certain matters, the board has set up two committees, the audit and remuneration committee, both of which are made up of board members. Agendas for regular board meetings are prepared by the Chairman together with the CEO. Two items on the agenda of every regular board meeting are an update on the business situation and a review of the company's financial development. In connection with every meeting, the board members meet in executive session (without the presence of the CEO) and the Chairman is then responsible for feedback to the CEO.

In good time prior to each board meeting, the members of the board are provided with written material as a basis for future discussions and decisions. During the board meetings, representatives for the executive management and other individuals take part to report on matters in their respective areas.

Every month, the board is provided with a business report including both financial updates and a description of the business situation. These reports are compiled by the CEO and CFO.

COMPOSITION OF THE BOARD IN 2008

	Function	Attendance	Independent 1)	Elected in	Shareholding
Christer Elmehagen	Chairman	7/7	No	2008	10,000
Göran Malm	Vice Chairman	10/10	Yes	2002	-
Jörgen Centerman	Member	9/10	Yes	2004	-
Sigrun Hjelmquist	Member	10/10	Yes	2007	1,000
Magnus Lindquist	Member	9/10	Yes	2007	-
Sven Löfquist	Member/CEO	10/10	No	1998	37,500
Lena Treschow Torell	Member	8/10	Yes	2004	3,400
Christer Zetterberg 2)	Member	4/4	Yes	1998	-

1) Independent in relation to the company, its management and major shareholders, in accordance with the criteria in the Swedish Code of Corporate Governance.
2) Member until the 2008 AGM.

EVALUATION OF BOARD PERFORMANCE

According to the procedural plan, the board continuously evaluates its performance through open discussions between its members and with the assistance of independent consultants. The results of this independent evaluation in 2008 have been handed over to the nomination committee and presented to the entire board of directors.

SUMMARY OF BOARD MEETINGS IN 2008

At each meeting, matters such as the business situation and financial reporting were dealt with. The audit and remuneration committees have reported on their respective activities and presented matters for decision by the board. The independent auditors took part in one meeting during the year to meet the entire board and to describe and present their conclusions from the audit.

Other significant matters taken up at board meetings in 2008, aside from ongoing financial reporting, adoption of interim reports and updates on the business situation, included:

a review of the company's long-term strategies after presentation of the market situation and competitor and technological analyses for the various product areas
adoption of guidelines for the company's development activities
adoption of the budget for 2008
a decision on the sale of the Täby property

COMPOSITION OF THE REMUNERATION COMMITTEE IN 2008

Name	Attendance
Göran Malm	4/4
Lena Treschow Torell	4/4
Sigrun Hjelmquist	4/4

The number of committee meetings from the date of the 2008 AGM to adoption of the annual report.

COMPOSITION OF THE AUDIT COMMITTEE IN 2008

Name	Attendance
Christer Elmehagen	5/5
Jörgen Centerman	4/5
Magnus Lindquist	5/5

The number of committee meetings from the date of the 2008 AGM to adoption of the annual report.

the appointment of a new president for the Japanese subsidiary.

AUDIT COMMITTEE

Every year, the board appoints an audit committee consisting of three board members not employed by the company. A majority of audit committee members must be independent from the company and its management. Furthermore, at least one member must be independent from the company's major shareholders.

Since the statutory meeting on April 3, 2008, the audit committee consists of

Magnus Lindquist (Chairman), Jorgen Centerman and Christer Elmehagen.

The audit committee is an administrative/advisory function of the board and does not remove any responsibility from the board as a whole. The task of the audit committee is to ensure the high quality of the company's financial accounting, reporting and internal control. This is done primarily by reviewing critical accounting issues and examining the company's external financial reports prior to their discussion and approval by the board. The company's CFO and Vice President Finance take part in audit committee meetings in order to present reports.

The committee also serves as the primary contact with the company's auditors and meets regularly with these, above all in connection with the quarterly interim reports.

The audit committee continuously reports its observations to the board.

The audit committee is also responsible for evaluating the quality of audit work.

The audit committee assists the nomination committee in preparing recommendations for nomination of auditors and fees for audit services. The audit committee establishes guidelines for which non-audit services may be procured from the company's appointed auditors. The audit committee held five minuted meetings during the period from the 2008 AGM until publication of the annual report. Certain meetings between the audit committee and the independent auditors take place without the presence of members employed by the company. The audit committee also monitors the company's internal work in preparation for issuance of the board's report on internal control over financial reporting.

REMUNERATION COMMITTEE

Every year, the board appoints a remuneration committee consisting of three board members not employed by the company.

Since the statutory meeting on April 3, 2008, the remuneration committee consists of Göran Malm, Lena Treschow Torell and Sigrun Hjelmquist.

The remuneration committee is an administrative/advisory function of the board and does not remove any responsibility from the board as a whole. The committee's primary tasks are to recommend and, subject to board approval, negotiate the salary, other remuneration and terms of employment for the CEO. The committee also ensures that the principles for remuneration and other terms of employment for other senior executives are competitive and consistent with the company's objectives. Furthermore, the committee assists the board in preparing recommendations for incentive schemes.

The remuneration committee has held four minuted meetings during the period from the 2008 AGM until publication of the annual report.

At the company's board meetings the remuneration committee reports on areas of responsibility within framework of its duties, which in 2008 included the structure of a variable salary scheme for all employees and terms of employment for the new president of the Japanese subsidiary.

PRINCIPLES FOR REMUNERATION AND OTHER TERMS OF EMPLOYMENT FOR MICRONIC'S EXECUTIVE MANAGEMENT

The 2008 AGM approved principles for remuneration to the executive management, which includes the CEO and seven other senior executives. The proposed principles for remuneration and other terms of employment for Micronic's executive management are prepared by the remuneration committee.

The main principle is to offer senior executives market-based remuneration and other terms of employment. Factors such as expertise, experience and performance are significant in determining the amount of remuneration at the individual level. The total remuneration package consists of basic salary, variable salary, pension and other benefits. The principles approved for 2008 differ from those for 2007 in two respects, regarding the employee stock options that were awarded in 2007 and not in 2008 and calculation of variable salary. For a more detailed description of the principles applied in 2008 and those proposed for 2009, see the Report of the directors and Note 12 on pages 52-54. Lastly, it can be noted that the remuneration committee assists in ensuring compliance with the guidelines for remuneration to senior executives that have been approved by the AGM.

SALARY AND REMUNERATION FOR THE CEO AND OTHER SENIOR EXECUTIVES

For complete details about expensed remuneration to the CEO and other senior executives in 2008, see Note 12 on pages 52-54. The executive management is presented on pages 32-33.

AUDITORS

The company's independent auditor is elected by the AGM to serve for a period of four years. The 2006 AGM elected the accounting firm of KPMG AB as the company's auditor, at which time KPMG appointed Authorized Public Accountant Anders Malmeby as Auditor in Charge of the Group's accounts. KPMG has been appointed to serve for the period until the 2010 AGM. At the request of the board, the company's auditor performs a review of all quarterly financial information in accordance with Standard on Review Engagements (SÖG) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. Other statutory audits of the annual report, annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and CEO are carried out in accordance with generally accepted accounting standards in Sweden (RS). Once a year, the auditors meet with the entire board. The independent auditors meet with the audit committee in connection with adoption of the company's interim financial statements.

FINANCIAL REPORTING TO THE BOARD

According to the procedural plan, the board determines which reports are needed

MICRONIC 2008
27

MICRONIC 2008

in order for the board to continuously monitor the company's development. Every month, the board is provided with a report on the company's results and financial position, to which the CEO's comments on development are attached. The board examines both interim reports and the annual report before these are published. The quality of the company's financial reporting is evaluated primarily through the audit committee. The audit committee meets regularly with the CFO and the company's independent auditors to discuss matters of significance in the accounting area. The audit committee reviews interim reports before these are submitted to the entire board in order to take up items of material significance with the independent auditors.

EXTERNAL FINANCIAL INFORMATION

In accordance with the Investor Relations policy adopted by the board, the company provides continuous information on its financial position in the form of quarterly, year-end and annual reports, as well as press releases in connection with major orders and other significant events. When the interim and year-end reports are published, the company also holds presentations for analysts, investors and the media. During the year, the executive management regularly meets with analysts and investors at several locations around the world. In connection with trade fairs and seminars, the media is given opportunities to meet with the company's representatives. Every year, the board adopts a corporate communications policy to establish the rules and procedures for communication and specify which individuals may speak on behalf of the company in various contexts.

All information that is distributed via press releases is also posted on the company's website, together with other information of value to various stakeholders, such as a description of Micronic's application of the Code.

THE BOARD OF DIRECTORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING IN 2008

INTRODUCTION

As stated in the Swedish Companies Act and the Swedish Code of Corporate Governance (the Code), the board of directors is responsible for internal control. This report has been prepared by the board in accordance with the Code and the guidelines issued by FAR SRS (the Institute for the Accountancy Profession in Sweden) and Svenskt Näringsliv (the Confederation of Swedish Enterprise), and is accordingly limited to internal control over financial reporting. The report has not been reviewed by the company's auditors.

Micronic's internal control is structured according to the established Internal Control – Integrated Framework, "COSO"*, which divides internal control into five components: Control environment, Risk assessment, Control activities, Information & Communication, and Monitoring. COSO defines internal control as follows:

Internal control is a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives regarding the effectiveness and efficiency of operations, the reliability of financial reporting and compliance with applicable laws and regulations.

The following description deals primarily with those aspects of internal control that are related to the category of financial reporting.

DESCRIPTION AND CONTROL ENVIRONMENT

The basis for internal control over financial reporting is the control environment, which includes the organizational structure, decision-making channels, powers and responsibilities, management philosophy and operating style as documented and communicated in the form of normative documents such as internal policies, manuals and guidelines. The management is working systematically to establish the values adopted in 2007 throughout the Group in order to create a common approach and strengthen the organization, and thereby improve efficiency and internal control.

Micronic's business activities are conducted primarily in a single location and are therefore judged to be of manageable complexity. This, in turn, means that the structure of the organization is simple and clear. Normative documents have been established in the form of procedural plans for the board and the board's audit committee and instructions for the CEO. The board has also adopted guidelines for external reporting of financial information. Instructions for authorization of business transactions are established by the board, while instructions for financial accounting and reporting are established by the executive management.

The board and management have determined the importance of timely and accurate reporting, and therefore also of maintaining an effective accounting function. The level of staffing and expertise in the accounting function is continuously monitored by the executive management. A strong controller function in the accounting organization also ensures that all business activities are evaluated and their efficiency optimized.

In 2006 the board initiated a special project to support and develop the company's internal control activities. These efforts have continued in 2007 and 2008 and will remain part of the company's administration in the future.

Responsibility for creating processes with a high degree of internal control is assigned to the respective departmental managers. Personnel from each area of operation take part in process reviews supervised by the accounting function as a step in documenting and evaluating significant processes.

RISK ASSESSMENT

The company has processes for risk assessment and control to ensure that the risks to which the company is exposed are managed within the limits established by the board.

The company's management continuously analyzes the company's business processes for assessment of efficiency and risks, including the identification of risks for errors in financial reporting. The company's support processes, including the financial closing processes, are also analyzed. The most critical business processes and most significant values, with regard to assets as well as business and product development, are found in the Swedish Parent Company. Furthermore, the Parent Company accounts for the bulk of sales. The annual process of evaluating internal control begins with an overall risk assessment based on significant items in the balance sheet and income statement. The risks are then graded and linked to processes. The processes which after such evaluation have been deemed of critical importance for Micronic include development, purchasing, production, sales, installation, financial closing and IT. The processes for payments and for salaries and pensions have also been deemed significant and are therefore evaluated. The risks for errors in financial reporting are identified and discussed by the audit committee. An examination of risk areas is also carried out by the board, primarily in connection with discussion and adoption of strategies and objectives.

CONTROL ACTIVITIES

The identified risks relating to financial reporting are dealt with through a number of identified control activities in the company's processes. Many of these processes are documented, updated and improved on an ongoing basis. Due to the nature of the company's business, every external business transaction is monitored closely and the accounting function has in-depth insight into the process. The control structure also includes the established division powers, roles and responsibilities and the management's monthly review of financial information.

INFORMATION AND COMMUNICATION

Micronic's information and communication channels are designed to promote complete, reliable and accurate financial reporting. This is accomplished by making steering documents such as internal policies, guidelines and instructions with relevance for financial reporting available and known to the affected personnel via the company's intranet and through frequent information meetings with all employees.

Staff members from the head office regularly visit the subsidiaries and the reverse is also true; employees from the subsidiaries visit the head office to further improve their knowledge of the Group's processes and objectives and to share information and experiences. In 2008 the responsible accounting and finance staff from all group companies gathered at a controller conference to further develop the exchange of experience between employees throughout Micronic.

MONITORING

Information about the effectiveness of internal control is monitored by the executive management. The board has determined that the effectiveness of internal control will be monitored through a self-assessment of critical processes. In 2006 the audit committee established a plan for reviewing the most critical processes, with the greatest possible impact on the company's financial position, over a number of years. The plan is reassessed yearly to identify any possible needs for reprioritization.

Following an initial risk assessment, based on the consolidated balance sheet and income statement, a decision is made about which processes will be documented and assessed during the year. Staff from the accounting function, together with the affected employees, reviews how the process is working, document the flow and evaluate the effectiveness of the process with respect to the identified risks and control activities with the help of a self-assessment in which employees from each area of operation evaluate the documented process and assess the identified risks and controls. This method promotes a wide understanding for the importance of internal control and responsibility for developing the processes is retained within each respective area of operation. In 2008 Micronic documented and evaluated the processes for salaries and pensions, system setup and development, after which all of the company's critical processes have now been documented and evaluated.

In 2008, at the request of the board, some of the processes that were evaluated internally during 2007 also underwent an external evaluation. The external evaluation found no evidence of serious shortcomings but has resulted in a number of observations and proposed areas for improvement. In 2009 an administrative phase will be started that will include both updating of the documented process reviews and assessment of the observations made during the internal and external evaluations.

Another aspect of monitoring is the accounting department's visits to the subsidiaries to review their processes, documentation of control activities and compliance with group-wide policies and guidelines.

Through the audit committee, the board establishes and oversees the evaluation processes that are carried out.

The audit committee maintains continuous contact with the independent auditors and is informed of their opinions and observations, which also contributes to the board's overall picture of the company's internal control.

The board is provided with monthly financial reports and discusses the financial situation of the company and the Group at each board meeting. Prior to board meetings where the quarterly financial statements are adopted, the audit committee has analyzed and assessed the financial information before it is adopted by the board.

STATEMENT

In light of the Group's structure and its management of risks in the processes described above, the board has not found it necessary to set up a special internal audit function.

MICRONIC 2008
29

Board of directors and auditor

Christer Elmehagen

Born in 1946. Chairman since April 2008. (President of AMF Pension until November 30, 2008.).

Education: LL.B, M.B.A.

Other board assignments: Chairman of Koneo, Optimal Print A/S, Trade Doubler and Deseven.

Previous positions: Vice President of SAF 1993–1998, President of Sandblom & Stohne 1991–1993, Vice President of Facit Group 1988–1991, various positions in the Ericsson group 1979–1988.

Shareholding in Micronic: 10,000.

Göran Malm

Born in 1947. Director since 2002. Chairman 2007–2008. Director since 2008.

Education: M.B.A.

Other board assignments: Chairman of North Asia Strategic Holdings Ltd, Boathouse Ltd and Children's Medical Foundation in Hong Kong, Smartpay Jieyin in Shanghai and Celestix Networks and Sourcebynet in Singapore. Board member of Samsung Electronics Co Ltd in South Korea, Elife in Tokyo, Dornier GmbH in Singapore and Envac in Stockholm.

Previous positions: Senior Vice President of Dell Corporation 1999–2000. Senior Vice President of General Electric Company 1997–1999. President and CEO of GE Medical Systems Asia 1992–1996. Executive Vice President of SKF 1990–1991. Associate Professor at Göteborg University School of Business, Economics and Law 2005–2006.

Shareholding in Micronic: 0.

Jörgen Centerman

Born in 1951. Director since 2004.

Education: M. Sc. Electronic Engineering.

Other board assignments: Chairman of Dacke PMC, Kemetyl, Gunnebo Industrier, board member of Segulah Advisor.

Previous positions: CEO of ABB 2000–2002. Various management positions at ABB 1981–2000.

Shareholding in Micronic: 0.

Lena Treschow Torell

Born in 1946. Director since 2004. President of IVA (The royal Swedish Academy of Engineering Sciences) until July 31, 2008.

Education: Ph.D. in Physics, Professor.

Other board assignments: Board member of Investor AB, SKF AB, SAAB AB, AB Ångpanneforeningen, Dagens Industri AB and Chalmers University of Technology Foundation.

Chairman of the Foundation for Strategic Environmental Research (MISTRA) and the European Council of Applied Sciences and Engineering (Paris).

Previous positions: Director of the European Commission's Joint Research Center in Brussels 1998–2001. Pro-Vice President, Chalmers 1995–1998.

Shareholding in Micronic: 3,400.

Sven Löfquist

Born in 1956. President and CEO of Micronic. Director since 2001. Deputy director 1998–2001.

Education: M. Sc. Electronic Engineering.

Other board assignments: None.

Previous positions at Micronic: Vice President, Sales and Marketing 1989–1999. Executive Vice President 1999–2001.

Shareholding in Micronic: 37,500.

Employee stock options: 75,000.

Sigrun Hjelmquist

Born in 1956. Director since 2007.

Education: M.B.A and M. Sc. Engineering Physics.

Other board assignments: SChairman of Sight Executive AB, board member of Svenska Handelsbanken AB, EON Sverige AB, RAE Systems Inc (USA), Audiodev AB, Symsoft AB, Seamless Distribution AB, Silex AB and Atea ASA.

Previous positions: Investment Manager and cofounder of BrainHeart Capital AB 2000–2005. President of Ericsson Components AB 1998–2000. Various positions in the Ericsson group 1979–1998.

Shareholding in Micronic: 1,000.

Magnus Lindquist

Born in 1963. Director since 2007.

Partner, Triton.

Education: Economist.

Other board assignments: Chairman of Alimak Hek Group AB.

Previous positions: CFO of Autoliv, 2001–2008, CFO of Perstorp, 1996–2001, CFO of Stora Cell Group, Gävle, 1993–1996.

Shareholding in Micronic: 0.

Auditor

Anders Malmeby

Born in 1955. Auditor for Micronic since 2006. Authorized Public Accountant, KPMG AB.

Other auditing assignments: Cybercom, Metro International and Fujitsu Siemens Computers.

MICRONIC 2008

Board of directors and auditor

Back row from left: Sven Löfquist, Magnus Lindquist, Jörgen Centerman.
Front row from left: Lena Treschow Torell, Göran Malm, Christer Elmehagen, Sigrun Hjelmquist.

MICRONIC 2008
31

Executive management and subsidiary presidents

EXECUTIVE MANAGEMENT

Sven Löfquist

Born in 1956. President and CEO. Employed since 1985.
Education: M. Sc. Engineering.
Previous positions: Vice President Sales and Marketing, Executive Vice President at Micronic.
Shareholding in Micronic: 37,500.
Employee stock options: 75,000.

Carl-Johan Blomberg

Born in 1952. Sr. Vice President and Chief Financial Officer. Employed since 2002.
Education: M.B.A.
Previous positions: Finance Director at Alfa-Laval, Procordia, Pharmacia and Net Insight.
Shareholding in Micronic: 0.
Employee stock options: 35,000.

Charles (Changhee) Lee

Born in 1957. Sr. Vice President Customer Operations and President of Micronic Laser Systems Korea Co., Ltd. Employed since 2005.
Education: Electronic Engineer.
Previous positions: Vice President of Taiwan Metra Co., Ltd., President of Toshiba Engineering Center Co., Ltd., Service Director of GE Healthcare Korea.
Shareholding in Micronic: 0.

Håkan Färdig

Born in 1969. Senior Vice President, Human Resources. Employed in 2008.
Education: Degrees in organization and management and labor law.
Previous positions: Country HR Manager, GE Healthcare, Sweden, HR Manager, Getinge, Country HR Manager, Sun Microsystems.
Shareholding in Micronic: 0.
Employee stock options: 35,000.

Kjell Bohlin

Born in 1952. Senior Vice President, Product Management and Sales. Employed since 2003.
Education: Ph.D. in Electronics.
Previous positions: Vice President and General Manager at Ericsson Microelectronics. Vice President Research & Development at Infineon Technologies Sweden.
Shareholding in Micronic: 3,000.
Employee stock options: 35,000.

Charlott Samuelsson

Born in 1963. Deputy Senior Vice President, Customer Operations. Employed since 1996.
Education: M. Sc. Electronic Physics.
Previous positions: Vice President, System and Application Development at Micronic and Vice President, Corporate Development at Micronic.
Shareholding in Micronic: 6,000.
Employee stock options: 35,000.

Tomas Carlsson

Born in 1950. Sr. Vice President, Production. Employed since 2004.
Education: M. Sc. Industrial Engineering.
Previous positions: Plant Manager and Product Area Manager Purchasing at Ericsson AB.
Shareholding in Micronic: 0.
Employee stock options: 35,000.

Johan Åman

Born in 1968. Sr. Vice President, Research & Development. Employed since 1996.
Education: M. Sc. Engineering Physics.
Previous positions: Vice President and General Manager, Business Unit Display, Vice President System and Application Development at Micronic.
Shareholding in Micronic: 1,626.
Employee stock options: 35,000.

SUBSIDIARY PRESIDENTS

Manny Ferreira

Born in 1953. President of Micronic Laser Systems Inc., USA. Employed since 2002.
Education: M. Sc. Engineering.
Previous positions: CFO of Portal Bay, COO, Ultra-Beam Lithography.
Shareholding in Micronic: 0.

Charles (Changhee) Lee

See previous column.

Taku Kawada

Born in 1956. President of Micronic Japan K.K. Employed since December 5, 2008.
Education: Mechanical Engineer.
Previous positions: President of Smiths Medical Japan Ltd. and various positions at GE Medical Systems Asia.
Shareholding in Micronic: 0.

SUBSIDIARY PRESIDENTS

Taku Kawada

Charles (Changhee) Lee

Manny Ferreira

MICRONIC 2008

Executive management and subsidiary presidents

MICRONIC 2008

Sven Löfquist

Carl-Johan Blomberg

Charles (Changhee) Lee

Håkan Färdig

Kjell Bohlin

Charlott Samuelsson

Tomas Carlsson

Johan Åman

Financial overview

SEK million	2008	2007	2006	2005	2004	2003^{1)}	2002^{1)}	2001^{1)}
Order intake	378	634	604	1,306	945	1,086	459	633
Profit and loss accounts
Net sales	568.6	523.0	1,204.1	1,275.8	839.5	428.0	496.1	699.3
Operating profit	-37.5	-290.8	122.6	172.4	125.5	-193.9	-89.7	17.1
Net financial items	1.9	3.3	3.7	-6.6	-5.2	0.1	3.0	-7.6
Profit/loss before tax	-35.5	-287.5	126.2	165.8	120.3	-193.8	-86.7	9.5
Tax	4.9	80.0	-33.3	-48.4	-11.9	35.1	23.3	-2.4
Profit/loss for the year	-30.6	-207.5	92.9	117.4	108.4	-158.7	-63.4	7.1
Balance sheets
Non-current assets	341.5	413.4	482.8	606.1	718.0	663.4	432.4	244.6
Inventories	309.7	333.6	353.3	357.7	339.3	295.3	327.7	279.5
Other receivables	353.8	309.0	245.8	345.1	208.3	94.3	229.2	257.0
Cash and cash equivalents	371.4	450.7	627.8	561.9	306.2	587.6	287.1	552.4
Total assets	1,376.4	1,506.7	1,709.7	1,870.8	1,571.8	1,640.6	1,276.4	1,333.5
Equity	888.6	907.5	1,109.8	1,025.3	907.9	798.4	631.4	697.2
Interest-bearing liabilities	163.3	246.5	295.7	359.8	383.7	512.5	451.2	437.6
Other liabilities	324.7	352.7	304.2	485.7	280.2	329.7	193.8	198.7
Total equity and liabilities	1,376.6	1,506.7	1,709.7	1,870.8	1,571.8	1,640.6	1,276.4	1,333.5
Capital employed	1,051.9	1,154.0	1,405.5	1,385.1	1,291.6	991.0	762.5	816.0
Net interest-bearing debt	-208.1	-204.2	-332.1	-202.1	77.5	-390.0	-156.0	-434.9
Capital turnover rate, times	0.5	0.4	0.9	1.0	0.7	0.5	0.6	0.9
Cash flow and liquidity
Cash flow from operating activities	-105.8	-77.3	219.0	323.5	-11.0	141.0	-97.0	7.0
Cash flow from investing activities	124.5	-44.6	-97.4	-40.3	-137.6	-228.9	-180.6	-152.2
Cash flow after investing activities, before financing	18.7	-121.9	121.6	283.2	-148.6	-87.9	-277.6	-145.2
Cash flow from financing activities	-102.2	-54.4	-50.9	-29.0	-131.6	390.3	-175.4	-152.2
Key ratios
Gross margin, %	28.4	29.3	54.3	54.4	55.8	38.4	47.8	56.2
Operating margin, %	-6.6	-55.6	10.2	13.5	15.0	-45.3	-18.1	2.4
Adjusted operating margin, %	-15.0	-40.2	18.2	22.3	5.2	-86.0	-44.2	2.4
Profit margin, %	-6.2	-55.0	10.5	13.0	14.3	-45.3	-17.5	1.4
Equity/assets ratio, %	64.6	60.2	64.9	54.8	57.8	48.7	49.5	52.3
Return on capital employed, %	-2.2	-21.6	9.8	13.3	11.5	-21.2	-9.4	4
Return on equity, %	-3.4	-20.6	8.7	12.2	12.7	-22.2	-9.5	1

1) The figures for 2003 and earlier years have not been restated to IFRS. The differences are mainly related to the application of IAS 16 (component depreciation) and IAS 39 (hedge accounting).

COMMENTS ON THE CONSOLIDATED FINANCIAL OVERVIEW

Profit and loss accounts

Micronic is a supplier of manufacturing equipment to the electronics industry and is steered by these companies' investment plans. Since 1999 Micronic delivers systems for both display and semiconductor applications. Despite having these two pillars, sales fluctuate dramatically in response to the available capacity in each market. The Group's sales of after market products and services are growing both percentage-wise and in absolute numbers.

To a large extent, gross margin is affected by both volumes and the product

mix. In years with lower volumes, gross margin is negatively affected by the relatively large impact of fixed costs for the production unit and by indirect production-related costs. Gross margin for 2008 amounted to 28 percent, but adjusted for one-time items was 40 percent. In the fourth quarter of 2008, when sales reached SEK 334 million, gross margin was on par with the Group's target of at least 50 percent.

The Group's long-term goal is to achieve an operating margin of over 15 percent, a financial target that Micronic has met in 2005 and 2006 when the company's sales exceeded SEK 1 billion. The Group's R&D expenses are high and represent a large share of total sales revenues. The Group's R&D expenses

MICRONIC 2008

SEK million	2008	2007	2006	2005	2004	2003¹⁾	2002¹⁾	2001¹⁾
R&D
R&D expenditure	197.3	198.4	221.7	198.7	258.5	282.3	311.0	230.0
R&D expenses	149.6	279.0	318.5	310.9	176.4	123.5	185.2	214.7
R&D expense/sales, %	26.3	53.3	26.5	24.4	21.0	28.9	37.3	30.7
R&D expenditure/sales, %	34.7	37.9	18.4	15.6	30.8	65.9	62.7	32.9
Capitalized development costs	71.9	34.1	32.4	17.0	117.6	174.3	129.7	-
Amortization of capitalized development costs	24.2	114.7	129.2	129.2	35.5	-	-	-
Data per share
Number of shares at end of year, millions	39.2	39.2	39.2	39.2	39.2	39.2	19.2	19.2
Average number of shares, millions	39.2	39.2	39.2	39.2	39.2	28.4	19.2	19.1
Average number of shares after dilution, millions	39.2	39.2	39.2	39.3	40.2	30.8	21.8	21.0
Share price at December 31, SEK	5.80	32.20	77.00	113.00	66.75	83.50	41.00	191.00
Dividend per share, SEK	-	-	-	-	-	-	-	-
Before dilution
Earnings per share (average number of shares), SEK	-0.78	-5.30	2.37	3.00	2.77	-5.59	-3.30	0.37
Equity per share (average number of shares), SEK	22.69	23.17	28.34	26.18	23.18	28.12	32.86	36.50
Cash flow per share (average number of shares), SEK	-2.13	-4.50	1.81	6.49	-7.15	10.65	-13.81	12.24
P/E ratio (number of shares at end of year)	neg	neg	32	38	24	neg	neg	516
Price/equity ratio (number of shares at end of year), SEK	0.26	1.39	2.72	4.32	2.88	4.10	1.25	5.26
After dilution
Earnings per share (average number of shares), SEK	-0.78	-5.30	2.37	2.99	2.70	-5.59	-3.30	0.32
Equity per share (average number of shares), SEK	22.69	23.17	28.34	26.10	22.58	28.12	32.86	57.00
Cash flow per share (average number of shares), SEK	-2.13	-4.50	1.81	6.47	-6.97	9.82	-12.17	11.13
P/E ratio (number of shares at end of year)	neg	neg	32	38	24	neg	neg	596
Price/equity ratio (number of shares at end of year), SEK	0.26	1.39	2.72	4.32	2.89	4.10	1.25	3.30

¹⁾ The figures for 2003 and earlier years have not been restated to IFRS. The differences are mainly related to the application of IAS 16 (component depreciation) and IAS 39 (hedge accounting).

consist partly of pure expenses and partly of amortization of previously capitalized development costs.

Over the past eight-year period, average annual R&D expenditure has amounted to SEK 237 million and reported annual expenditure to SEK 220 million. Since 2002 the company has capitalized development costs of SEK 577 million in accordance with the applicable accounting rules. As of 2004, Micronic recognizes amortization of previously capitalized development costs as a development cost and has amortized a total of SEK 433 million over the past four years. In 2008 aggressive measures were taken to reduce the Group's total costs. Capitalized development costs for the Sigma project were fully amortized at year-end 2007 and Micronic does not expect investments in future development projects to reach corresponding levels.

Investments and financing

In the past eight years the Group has invested a total of approximately SEK 965 million, of which SEK 577 million refers to capitalized development projects. Of the remaining investments, these refer mainly to the property in Täby, which was sold at the end of 2008, as well as manufacturing machinery, computers and equipment. The property sale generated a gain of SEK 95 million after repayment of property-related loans.

In 2003 Micronic carried out a rights issue that provided net proceeds of SEK 316 million. The motive for the share issue was to finance R&D activities, mainly with a focus on semiconductor applications. The Group has also previously financed its operations through a convertible debenture loan from ASML amounting to SEK 320 million, which was repaid in 2004. The same year, Micronic received an advance on future royalties from ASML in accordance with an agreement between the companies regarding certain collaborative development. The amount of the advance was initially EUR 20 million. After two installments, the advance at year-end 2008 amounted to EUR 13 million.

MICRONIC 2008

Report of the directors

The board of directors and the CEO of Micronic Laser Systems AB (publ.) corp. ID. no. 556351-2374, domiciled in Täby, Sweden, hereby present the annual report and consolidated financial statements for the financial year January 1, 2008 – December 31, 2008.

Issuance

The information in this annual report is subject to the disclosure requirements of Micronic Laser Systems AB in accordance with the Swedish Securities Market Act. Micronic published an interim report for the fourth quarter and the full year 2008 through a press release issued at 8:00 a.m. on January 28, 2009, and on the corporate website www.micronic.se. The full annual report has also been published through a press release issued at 9:00 a.m. on March 16, 2009, and on the website on the same date.

Operations

Micronic is a Swedish high-tech company that develops, manufactures and markets a range of extremely accurate laser pattern generators. The systems are used by the world's leading electronics companies in the manufacture of displays for TVs and computers and in the manufacture of semiconductor chips. Photomasks are critical enablers for mass production of displays and semiconductors. Micronic also manufactures metrology systems for display photomasks. Nearly all sales are generated in Asia, where around 80 percent of the customers and installed systems are found.

The Micronic share has been listed on the stock exchange since March 2000 and since April 2008 on NASDAQ OMX Nordic Exchange, Stockholm List, Small Cap, Information Technology.

Group structure

The Group consists of the Parent Company, Micronic Laser Systems AB, and the wholly owned subsidiaries Micronic Japan K.K., Micronic Laser Systems Korea Co. Ltd., Micronic Laser Systems, Inc., USA, Micronic Laser Systems Far East Co. Ltd. and Micronic Treasury AB.

The Group's R&D, manufacturing and marketing activities are conducted in the Parent Company. In Japan, South Korea and the USA, Micronic has subsidiaries that are responsible for service and customer support. These also work in close cooperation with the Parent Company in marketing, sales and installation. In Japan Micronic also operates the Asia Technical and Application Center, ATAC, to serve the entire Asian region. In addition, Micronic has a smaller subsidiary in Taiwan and a local office in China. In both of these countries, Micronic also works via an agent. Micronic Treasury AB has functioned as an intermediary for distribution of the employee stock option program.

The Group's operations are structured in a functional organization with joint R&D, manufacturing, marketing and sales for all products.

Changes in the board and executive management

The 2008 AGM elected Christer Elmehagen as Chairman. Göran Malm, who served as Chairman from September 18, 2007, until the 2008 AGM, was elected Vice Chairman. As of January 1, 2008, the executive management team was increased by one person when Håkan Färdig was hired as Human Resources Director.

Employees

The average number of employees in the Group during 2008 was 398 (416), of whom 285 (302) work in Sweden. Women make up 17 percent (17) of the average number of employees in the Group. Employee turnover in 2008 was 15 percent (13). The number of employees at year-end was 384 (413). In the Parent Company, there were termination agreements with 27 employees. Including these terminations, the number of employees in the Group at the end of 2008 was 357 (413). One third of the Group's employees work in R&D. Micronic actively pursues programs to enhance the skills of its employees.

In January 2008 a new Human Resources Director was appointed and is also a member of the executive management team. The aims for human resource activities 2008 have been to systematize the employee development processes, to increase clarity by defining and tying the individual employees' goals to Micronic's business objectives and by globalizing the company through greater interplay between the various group units. These goals have culminated in activities such as the development of a process for employee development, further development of the Group's leadership program and focused efforts to implement Micronic's values. For a more detailed description of how Micronic sees its role as employer, see the section on Employees, Environment and Society on pages 16–19.

Financial overview

Net sales for 2008 reached SEK 569 million (523), a continued low level that is explained by a worldwide economic downturn in which most display panel makers have cut back their production volumes to avoid building up excess stock. Equipment investments have been pushed forward in time and the start-up of new production lines postponed. For additional comments on the Group's results and financial position, see pages 40–43.

Key events in 2008

Micronic received orders for two systems from the Sigma series for the production of semiconductor photomasks and one FPS5100 laser pattern generator for volume production of photomasks for advanced electronic packaging applications. Micronic delivered the first Prevision-10 system, designed to produce photomasks for next generation display manufacturing, G10. Micronic launched the FPS5300 laser pattern generator for production of photomasks for advanced electronic packaging applications. Micronic sold its property in Täby outside Stockholm and is now leasing back the property. The sale generated a capital gain of SEK 98 million. The sales proceeds amounted to SEK 208 million. Cash and cash equivalents increased by SEK 95 million after repayment of bank loans. In addition, SEK 32 million has been deposited as security for future lease payments. This amount, which is interest-bearing, will be released over the term of the lease.

Research and development

R&D expenses in 2008 totaled SEK 150 million (279). Actual R&D expenditure during the year was SEK 197 million (198). Aside from this, the operating result includes SEK 24 million (115) in amortization of previously capitalized development costs. In 2008 new development projects were capitalized in an amount of SEK 72 million (34). For a more detailed description of the Group's R&D activities in 2008 and for financial comments, see pages 20–23 and 40–43.

The Group's environmental work

As a manufacturing company, Micronic has no significant environmental impact. Micronic's production unit is not subject to permit requirements from the environmental authorities, but only a reporting requirement for the use of coolants (HFC) in the company's air conditioning system. Nor is Micronic subject to the EU directive on producer responsibility for Waste Electrical and Electronic Equipment (WEEE) or restrictions on the use of hazardous substances (RoHS). Despite this, Micronic works with a long-term goal to minimize any environmental impact caused by the company. Micronic's environmental policy is based on a commitment to promoting an environmentally sustainable society. To meet this goal, Micronic has formulated a number of objectives. Micronic strives to conduct its operations

MICRONIC 2008

in the most resource- and energy-efficient manner possible. Through environmental training of the company's employees, environmental impact is minimized. The products developed by Micronic should give rise to a minimum of environmental impact throughout their product life cycle. Micronic inspires and encourage its external business partners to comply with and respect international environmental laws and regulations. Because Micronic's most significant environmental impact is found in the energy area, the year's efforts were focused on reducing this environmental impact as far as possible. In the past year Micronic invested in a geothermal heating and cooling system that will save at least 150 m^{3} of fuel oil and thereby reduce CO_{2} emissions. For a more detailed description of Micronic's environmental and OHS work, see the section on Employees, Environment and Society on pages on pages 16--19.

Corporate governance

Micronic applies the Swedish Code of Corporate Governance. For a detailed description of the company's corporate governance practices, see the Corporate Governance Report on pages 24--29.

Risks and risk management

Through its operations Micronic is exposed to risks of both an operating and financial nature. For a description of the company's identified risks and procedures for risk management, see the descriptions on pages 38--39.

Public tender offers

Micronic has a total of 39,166,616 shares outstanding, all of the same class. Each share grants the right to one vote. There are no limitations on the transferability of shares owing to provisions in the Articles of Association. The company has two shareholders, Catella Fonder and AMF, with a holding of 10 percent or more at year-end 2008. There are employees with private shareholdings in the company, although not the employees as a whole through a pension fund or similar. To the company's knowledge, there are no agreements between shareholders giving rise to limitations in the right to transfer shares. Furthermore, the company is not party to any agreement that will have effect, be altered or cease to apply if control over the company should change as a result of a public tender offer.

According to the Articles of Association, the members of the board of directors are appointed yearly by the AGM. The Articles of Association do not contain any other restrictions regarding the appointment or dismissal of board members or regarding amendments to the Articles of Association. Instead, all other decisions are made in compliance with the Swedish Companies Act. There are no agreements between the company and members of the board or employees granting the right to remuneration if these resign voluntarily, if their employment is terminated without reasonable grounds or they are terminated as a result of a public tender offer, other than those presented below. Agreements between the company and senior executives are described below. The two foreign subsidiary presidents who are not members of the executive management team, are covered by agreements providing termination benefits for six or twelve months in the event of dismissal by the company.

Proposed guidelines for remuneration to senior executives

Recommendations for remuneration to senior executives are prepared by the remuneration committee and put before the board of directors for decision. The principles will be adopted by the AGM on April 1, 2009. The proposed guidelines for remuneration to senior executives include the CEO and the seven individuals who together with the CEO make up the executive management team. For a more detailed presentation of the executive management, see pages 32--33 and Note 12 on pages 52--54.

In handling matters regarding remuneration to senior executives, external advice is sought when necessary. The main principle is to offer senior executives market-based remuneration and terms of employment. Actual levels of remuneration are determined on the basis of factors such as expertise, experience and performance. The total remuneration package consists of fixed basic salary, variable salary, employee stock options, pension benefits and other benefits. The fixed basic salary is subject to yearly review. The fixed basic salary for the CEO is a total compensation which the CEO may, at his own discretion, receive in the form of cash salary and/or for payment of pension premiums to an insurance company. The basic salary of other senior executives does not include pension benefits.

Variable salary is based on a performance targets for the company as a whole (profit before tax) and is payable on the attainment of business targets for the individual employee or unit. The maximum amount of variable remuneration is equivalent to 50 percent of basic salary. Senior executives are entitled to a company car and health insurance. Senior executives have been awarded employee stock options according to the conditions for the employee stock option program 2007/2012.

The contractual retirement age is 60 years for the CEO and 65 years for other senior executives. All pension benefits for other senior executives are of the defined contribution type, which means that the company pays a pension premium and has no further legal or constructive obligations.

The most recently approved guidelines for remuneration to senior executives are presented in Note 12. The board may deviate from these guidelines in individual cases when there is special reason to do so.

Information about agreements for termination benefits

The employment contract with the CEO specifies a mutual notice period of six months. In the event of dismissal from his duties, the CEO is entitled to termination benefits corresponding to 18 months' salary. The employment contracts with the CFO and SVP Product Management and Sales specify a notice period of nine months in the event of dismissal by the company, in which case they are entitled to termination benefits corresponding to 12 months' salary after the period of notice. For other senior executives there is a notice period of six months in the event of dismissal by the company, with termination benefits equal to six months' salary. The agreements for the president of the South Korean subsidiary and the members of the executive management team grant entitlement to termination benefits corresponding to two months for every year of service. The employment contract, with related benefits, is valid during the notice period. In cases where termination benefits are received, no other benefits are payable.

Key events after the end of 2008

After the end of the financial year, no events have taken place in the Micronic Group which have had a significant financial impact on the company.

Outlook for 2009

Total spending on display capital equipment in 2009 is predicted to fall sharply to USD 6.9 billion and then bounce back to USD 9.0 billion in 2010 (DisplaySearch, January 2009). This dramatic anticipated drop in investment should be seen in light of the explosive capacity buildup in 2008 and worldwide economic downturn in the second half of the year. Investments in display pattern generators were very low in 2008 but are expected to pick up at a relatively early stage of a market upswing, since the existing production capacity is operating at full capacity. The current market downturn could also stimulate demand for Micronic's Prexision-10 system as planned investments in older generation fabs are upgraded to more cost-effective Generation 10 and 11 (G10, G11) facilities.

Due to an anticipated decrease in demand for consumer electronics in 2009, the semiconductor market is set to decrease by 10 percent

Spending on semiconductor capital equipment fell steeply in 2008, by 25 percent, and is projected to decline by a further 26 percent in 2009, although a recovery is awaited in 2010 (VLSI Research, December 2008). The photomask market has been forecast to contract by 11 percent to USD 2.7 billion in 2008 (VLSI Research, December 2008). As a result, the market for pattern generators is expected to weaken during 2009 and the installed base to shrink as older equipment is successively phased out of production without being replaced.

In view of the ongoing global financial crisis, it is impossible to predict when the market for pattern generators will revive. The board of directors expects the current order backlog for system sales of SEK 224 million to ship in the first half of 2009, and will wait to announce its guidance on sales for the full year at a later date.

For the proposed disposition of accumulated deficit, see page 67.

Risks and risk management

Through its operations, the Group and the Parent Company are exposed to risks of both an operating and financial nature that are more or less within the company's control. The company uses an ongoing process to identify all existing risks and assess how these should be managed. Through development of company processes, its risk management and ongoing development of the Group's insurance solutions, Micronic minimizes its total risk and therefore also the cost of risk management. Costs that can be eliminated through loss prevention measures include penalties or discounts to customers as a consequence of damage or delays in production. With efficient and secure processes it is also possible to shorten the manufacturing time, leading to lower production costs. In addition, the cost of the Group's insurance solutions can be decreased by showing that efficient processes lead to reduced damage. In 2008 Micronic's processes, including those in the risk management area, were assessed through an extensive supplier evaluation.

Operating risks

Market development/business cycle

The Group's sales are influenced mainly by investments in the electronics industry. In the short term, the company's operations, profitability and financial position could be affected by continued limited investment in the electronics industry. These risks could be further magnified by the generally turbulent financial situation and lead to a market downturn.

To reduce the effects of a possible downturn, Micronic is taking steps to diversify its product range to address a wider range of application areas. A future downturn for certain applications can then be offset by growing demand and increased revenue in other product areas.

Micronic is also developing its offering of peripheral equipment and other services in order to decrease its dependency on direct system sales. With a rising number of systems in operation at customer sites, there is a growing market for service and add-on sales.

Political risks

Although most of Micronic's production and development take place in Sweden, the majority of customers are based in Asia, with an emphasis on Japan, South Korea, Taiwan and to a certain extent also China. Micronic has subsidiaries in Japan, the USA, Taiwan and South Korea which offer service and customer support and assist the Parent Company with system sales.

At present, the countries where Micronic operates are not deemed to represent any significant political risks.

Customers

Because there are a limited number of captive and commercial photomask manufacturers in the world, the Group is dependent on a few large customers. A continued low order intake from, or sales to, an individual customer can have a significant impact on the Group's profit and financial position in the short term. Earnings for a specific period can be affected by the postponement in the date of shipment for individual systems, arising as a result of changed conditions for a customer. There is also a trend towards fewer but larger individual orders, which can lead to a longer sales cycle.

Development

Due to the rapid pace of technological development in the areas where the Group is active, it is vital that the products are delivered at the specified time. The Group is also exposed to development risk, consisting of the risk that research and development activities will not lead to new and profitable business opportunities to the intended extent. Micronic strives to minimize these risks, for example by investing aggressively in technological innovation in order to meet high customer expectations while at the same time providing superior service through a strong local presence. Micronic often collaborates closely with its customers in the development of new applications. Micronic works at the cutting edge of technological development, which creates a risk that certain development activities will not lead to commercial products or that it could be difficult to predict the cost of finding a solution.

Suppliers

Some of the critical components used in the Group's products are developed and sold by a limited number of suppliers. Micronic works continuously to evaluate alternative suppliers of critical components.

Product liability and intellectual property

Through its business operations Micronic is subject to normal product liability, which means that personal injury and property damage caused by Micronic's products to a customer or third party could lead to claims against Micronic. For risks of this type, Micronic has taken out normal insurance, whereby the level of risk is deemed limited.

Micronic's success is also dependent on the Group's ability to protect its business secrets. Micronic utilizes various methods to protect confidential information. To reduce the risks related to intellectual property, Micronic works continuously to protect the use of innovative new technology through patents and license agreements.

By applying a proactive strategy for early identification and protection of innovations through patent applications, combined with analysis of the intellectual property potential of various products, the company minimizes its vulnerability.

Property risks

Because its operations include large-scale production and development in its own property, Micronic is also exposed to traditional property risks such as fire and water damage, theft, crimes against property, etc., that could lead to serious disruptions in operations. The Group has adequate insurance coverage for damage of this type, such as business interruption insurance and property insurance.

After the property sale in 2008, certain of these insurance policies have been taken over by the new property owner.

Micronic also pursues active loss prevention, among other things with regard to building service systems and processes, for example by providing all employees with fire safety training and carrying out regular fire drills.

Micronic has prepared a Business Continuity Plan (BCP) to ensure fast action and limitation of losses in the event of a disaster. The BCP contains action plans for different scenarios. In 2008 the staff in certain departments took part in realistic practice drills based on this plan. Furthermore, Micronic has customary board, directors and officers' liability coverage for all companies in the Group.

Financial risks

Financial risks arise due to fluctuations in the Group's profit and cash flows resulting from movements in exchange rates, interest rates, credit risks and borrowing risks. To regulate its handling of financial risks, there is a finance policy that provides a framework of guidelines and rules for financial risk management. The policy is adopted by the board and revised annually. The Group's finance operations are aimed at securing the Group's financing as cost-effectively as possible and minimizing the negative effects of rapid exchange rate fluctuations on reported profit and cash flow. The Group's finance operations are carried out mainly in the Parent Company's finance department.

MICRONIC 2008

Foreign exchange risk

Micronic's single largest financial risk is foreign exchange risk, since the Group's sales are denominated almost exclusively in foreign currencies (see table). The laser pattern generators are sold primarily in US dollars and Japanese yen, while services are also invoiced in Korean won. In 2008 the average rate for the Japanese yen climbed by 11 percent and on the balance sheet date for 2008 was 50 percent higher than at year-end 2007. Over the same period, the average rate for the US dollar weakened by 3 percent against the Swedish krona. The US dollar strengthened at end of the year and the closing day rate was 20 percent higher than at year-end 2007.

The Korean won has weakened against the Swedish krona, the average rate by 17 percent and the closing day rate by 11 percent, compared to year-end 2007. If sales for 2008 were translated at the same exchange rates as in 2007 (without consideration to forward exchange contracts), the reported operating profit for 2008 would have been approximately SEK 37 million lower.

Sales consist of a relatively limited number of systems with typically long delivery times, i.e. the period between order receipt and delivery. Services are sold and invoiced locally by the subsidiaries. Most of the Group's costs are incurred in SEK.

Foreign exchange risk can be classified partly as translation exposure arising in connection with the translation of the financial statements of foreign subsidiaries, and partly as transaction exposure. Forward exchange contracts and loans/investments are used to reduce exposure in foreign currency. That portion of capital employed in the foreign subsidiaries that is financed through loans, is financed in local currency.

In order to minimize transaction exposure, the company uses forward exchange contracts to hedge contracted cash flows where the delivery date can be determined with a high degree of certainty. Currency hedging is undertaken in accordance with the board's established policy. Contracted cash flows consist of incoming orders. The hedged percentage of a contracted cash flow depends on the degree of uncertainty regarding the delivery date. As the delivery date approaches, Micronic increases the hedged portion of the respective contracted inflows. Neither forecasted flows that are not covered by underlying orders nor translation exposure are hedged.

Given the same income and cost volumes as in 2008, the effect of a 10 percent change in the rate of exchange for JPY, USD or KRW would affect operating profit for 2009 in an amount of approximately SEK 46 million.

Interest risk

Micronic is exposed to interest risk, albeit to a very limited extent. Interest risk is defined as the risk for changes in the yield on fixed-income instruments arising from changes in market interest rate and the related cash flow risk since higher interest rates also lead to an increased cash outflow. Micronic's interest risk is limited since investments are made in accordance with liquidity plans, meaning that investments are held to maturity but with an investment horizon of no more than six months. No investments were made in risk-bearing paper during 2008.

The Group's borrowing has decreased through the sale of the property in Täby, at which time all property-related loans were redeemed. A small number of loans related to operations in the foreign companies remain. As a result, interest risk arising from the Group's financial liabilities is very limited. Interest risk is decreasing both due to the low volume and as a result of generally lower interest rates, and no financial instruments are used to hedge the effects of negative changes in market interest rates. The Group's remaining loans are covered by agreements with variable interest rates. Note 27 contains a specification of interest terms on the Group's loans.

MICRONIC'S INCOME AND EXPENSES BY CURRENCY
Currency	% of income	% of expenses	Average rate in 2008	Average rate in 2007	Rate at year-end 2008	Rate at year-end 2007
JPY	52	15	0.0640	0.0574	0.0860	0.0572
USD	39	11	6.5808	6.7607	7.7525	6.4675
KRW	9	4	0.00602	0.00728	0.00613	0.00691
EUR	0	6	9.6055	9.2481	10.9355	9.4735
SEK	0	64

Credit risk

Through its operations Micronic is also exposed to credit risk. Credit risk is divided into risks arising from customer sales and related derivative transactions, as well as risks associated with liquidity management.

The sale of goods or services gives rise to customer credit risk, meaning a risk that the Group's customers will be unable to meet their payment obligations. Micronic sells a relatively small number of systems to a limited number of customers, primarily in Asia, which represents a concentration of risk. These customers are major producers of photomasks, where Micronic's systems make up a small part of a larger manufacturing facility. The customers are typically well-known, have been established in the market for many years and have historically good credit ratings. Because the number of suppliers of manufacturing equipment is also limited, Micronic has longstanding business relationships with its customers.

Partly to minimize credit risk, Micronic is working intensively to increase advance financing from customers as far as possible.

When doing business with new customers or in new geographical areas, Micronic minimizes credit risk by requiring letters of credit or other forms of collateral. In addition, Micronic has historically had very low credit losses.

One type of credit risk is so called counterparty risk, defined as the risk that a counterparty, a financial institution, will be unable to live up to its contractual obligations on the settlement date. Micronic enters into derivative transactions only with Sweden's largest banks.

Micronic's liquidity is found primarily in the Parent Company. Investments are made in financial instruments with high credit ratings or in banks. At year-end 2008 all liquidity was placed in banks.

Liquidity risk

The Group invests its excess liquidity without assuming any significant liquidity risk, i.e. according to the established policy, excess liquidity is invested in bank deposits or other highly liquid fixed-income instruments. The reason for this is that it must be possible to liquidate investments at short notice in order to minimize the liquidity risk associated with them. No investments in fixed-income securities were made during 2008.

Micronic monitors liquidity in the Parent Company and the Group by continuously preparing both short- and long-term liquidity forecasts as a basis for decision on any borrowing or investments. These liquidity forecasts, which among other things are updated with respect to incoming payments from system sales, also provide a basis for increasing the hedged share of contracted flows as the date of delivery approaches.

Group

CONSOLIDATED PROFIT AND LOSS ACCOUNT

SEK thousand	Notes	2008	2007
Net sales	6	568,617	522,981
Cost of goods sold	5	-407,154	-369,740
Gross profit		161,463	153,241
Other operating income	10	121,567	302
Research and development expenses	11	-149,644	-279,004
Selling expenses		-52,853	-48,690
Administrative expenses		-96,382	-103,322
Other operating expenses	5, 10	-21,611	-13,334
Operating profit/loss	5	-37,460	-290,807
Financial income		13,320	14,161
Financial expenses		-11,377	-10,910
Net financial items	14	1,943	3,251
Profit/loss before tax		-35,517	-287,556
Tax	17	4,872	80,015
Profit/loss for the year		-30,645	-207,541
Earnings per share before and after dilution, SEK		-0.78	-5.30
Average number of shares before and after dilution, thousands		39,167	39,167

COMMENTS ON THE CONSOLIDATED PROFIT AND LOSS ACCOUNT

Order intake and order backlog

Order intake in 2008 amounted to SEK 378 million (634), of which the after market accounted for SEK 209 million (186) and system orders for SEK 169 million (448).

Micronic received orders for a total of 3 systems (6), consisting of 0 systems (4) for display applications, 2 systems (1) for semiconductor applications and 1 system (1) for electronic packaging applications. The order backlog at December 31, 2008, excluding service, totaled SEK 224 million (332) and consisted solely of system orders. All systems in the order backlog are expected to ship in the first half of 2009.

Sales

Net sales for the full year 2008 reached SEK 569 million (523), of which SEK 334 million (225) referred to the fourth quarter. After market sales accounted for SEK 238 million (186), an increase of 28 percent during 2008 that is largely attributable to sales of add-on products for existing systems. System sales in 2008 amounted to SEK 331 million (338) and consisted of 1 system (4) for display applications, 2 systems (1) for semiconductor applications and 0 systems (3) for electronic packaging applications. Of total sales in 2008, customers in Asia accounted 81 percent and customers in the USA for the remaining 19 percent. Two systems were shipped to customers in Asia and one to a customer in the USA. In 2007 all systems were shipped to customers in Asia.

Operating expenses

Operating expenses for 2008 totaled SEK 606 million (814), of which the cost of goods sold accounted for SEK 407 million (370). The year's gross profit of SEK 161 million (153) is equal to a gross margin of 28 percent (29). Fourth quarter gross margin was 37 percent (31). Gross profit is charged with direct costs for delivered goods and services, including costs for system setup at the customer site and warrantees. All estimated remaining costs are recognized in connection with shipment and revenue recognition of a system. Depending on volumes and the

product mix, gross profit, and therefore also gross margin, can vary over time. Apart from these direct costs, gross profit is charged with certain fixed costs for the production department as well as certain technology-related expenses. In the fourth quarter of 2008 inventories were written down by an amount of SEK 67 million that was charged to gross profit. The write-down referred to components used in products that are no longer marketed and actively sold. Adjusted for this inventory write-down, gross margin was 40 percent for the full year and 57 percent for the fourth quarter.

Research and development in 2008

The operating result for 2008 was charged with R&D expenses of SEK 150 million (279). Actual R&D expenditure was SEK 197 million (198), of which SEK 72 million (34) has been capitalized. These costs in full refer to development of the Prevision-10 system. Amortization of capitalized development costs related to the Prevision-10 project will begin in connection with delivery of the first system. Amortization will therefore begin in January, 2009. Previously capitalized development costs were amortized in an amount of SEK 24 million (115) during the year. The decrease in amortization compared to the prior year is explained by the fact that development of the Sigma was fully amortized at year-end 2007. See also Note II. Each development project is assessed individually to determine whether the criteria for capitalization have been met. Amortization of capitalized costs is started when a development project is completed, at which time it begins to generate revenue.

Micronic's R&D activities in 2008 were focused on completion of new products, enhancements in existing systems and feasibility studies on new products in the electronic packaging area. Development of the next generation tool for display manufacturing, Prevision-10, continued in 2008 and led to the first shipment of a production system. The Prevision-10 is designed to meet the extreme requirements of display photomasks through Generation II (GII). In the electronic packaging area, feature resolution in the FPS platform has been enhanced. Micronic also developed a number of after market products during 2008, in line with its goal to increase after market sales. For a more detailed description of Micronic's R&D activities in 2008, see page 20-23.

MICRONIC 2008

Financial reports

Selling and administrative expenses

Selling expenses in 2008 are reported at SEK 53 million (49).

Commission costs amounted to SEK 9 million (11), corresponding to just under 3 percent (3) of system sales. Administrative expenses for 2008 totaled SEK 96 million (103).

Administrative expenses in 2008 include product management expenses of SEK 38 million (38). Administrative expenses are also charged with costs for the employee stock option program, which runs until 2012. The estimated total cost of the program is approximately SEK 15 million, to be allocated over the period ending in the first quarter of 2010. Profit for 2008 was charged with costs of SEK 4.5 million for employee stock option program, where by total costs of SEK 9 million have been recognized for the program in 2007 and 2008.

Other income and expenses

Other income and expenses in 2008 amounted to SEK 100 million (-13). The property in Täby was sold during the fourth quarter of 2008 and is now leased back by Micronic. The capital gain on the sale was approximately SEK 98 million. Profit for the period includes exchange gains of SEK 18 million (-13). In the fourth quarter Micronic recognized costs of SEK 15 million for restructuring of operations, leading to a staff reduction of 27 people in Sweden.

Operating profit

The Micronic Group reported an operating loss of SEK 37 million (291) for the full year 2008. Operating profit/loss is affected by capitalization of development costs and amortization of capitalized development costs. Adjusted for these items, Micronic reported an operating loss of SEK 85 million (210) for the full year 2008. As a result, the operating result was positively affected in a net amount of SEK 129 compared to 2007. The year's operating result has also been positively affected by a capital gain of SEK 98 million on the sale of the property in Täby. At the same time, operating profit for the year includes a SEK 67 write-down of inventories and costs of SEK 15 million for restructuring of the Group's operations in Sweden. See also Note 5.

Tax

The consolidated loss before tax for the full year 2008 was SEK 36 (288). The Group's total tax effect was SEK 5 million (80). Of total reported tax, approximately SEK 4 million (6) consists of current tax arising in the foreign subsidiaries and the Parent Company, and the remainder of deferred tax. The Parent Company's loss before tax for 2008 was SEK 81 million (221). The difference in the pre-tax loss between the Group and the Parent Company is largely explained by the fact that development costs are reported as incurred in the Parent Company, while certain development costs in the Group are capitalized in the balance sheet to be later expensed as amortization. The closing balance of accumulated loss carryforwards in the Parent Company at year-end was SEK 254 million (247), of which the full amount is expected to be utilized against future taxable profits in the Parent Company.

Net profit and earnings per share

The consolidated loss after tax for the full year 2008 was SEK 31 million (207). The total number of shares outstanding at December 31, 2008, was 39,166,616. Under the stock option program approved by the 2007 AGM, the number of shares can be increased by a maximum of 1,540,000 to 40,706,616. Earnings per share before and after dilution, calculated on the average number of shares in 2008, 39,166,616, were SEK -0.78 (-5.30). The average reported number of shares has not been affected by any dilution effects from the employee stock option program 2007/2012, since the Group has shown a loss at the same time the market price is lower than strike prices of the option program.

Order intake by quarter

Sales by quarter

Gross margin

R&D expenditure

Earnings per share and operating margin

MICRONIC 2008

Group

CONSOLIDATED CASH FLOW STATEMENT

SEK thousands	Notes	2008	2007
Operating activities
Profit/loss before tax		-35,517	-287,556
Adjustments for non-cash items
Depreciation/amortization and impairment of assets		72,467	193,965
Capital gain on the sale of non-current assets		-97,113	7,551
Unrealized foreign exchange differences		-6,971	5,459
Provisions for employee benefits		23	-174
Other provisions		-150	826
Other non-cash items		103,485	-13,467
Paid income tax		-2,095	-6,340
		34,129	-99,736
Cash flow from changes in working capital
Inventories		-16,123	-8,494
Trade receivables		61,214	-41,796
Other receivables		-122,793	-18,178
Trade payables		-24,203	-20,087
Other liabilities		-38,027	111,035
Cash flow from operating activities		-105,803	-77,256
Investing activities
Investments in intangible assets	18	-71,886	-35,351
Investments in tangible assets	19	-11,311	-9,167
Sale of tangible assets	19	207,663
Investments in financial assets		-	-93
Cash flow from investing activities		124,466	-44,611
Financing activities
Repayment of debt		-102,159	-54,420
Cash flow from financing activities		-102,159	-54,420
The year's cash flow		-83,496	-176,287
Cash and cash equivalents at beginning of year		450,662	627,797
Exchange rate difference in cash and cash equivalents		4,218	-848
Cash and cash equivalents at end of year		371,384	450,662
Interest received and paid
Interest received		13,460	14,589
Interest paid		-10,433	-11,830
		3,027	2,759
Other non-cash items
Write-down of inventory/obsolescence		76,179	2,764
Restructuring reserve		11,225
Changes in provisions for setup, warranty and commissions		6,897	-33,514
Changes in provisions for variable salary		4,692	12,832
Costs for the employee stock option program		4,492	4,451
		103,485	-13,467

CONSOLIDATED BALANCE SHEET

SEK thousands	Notes	Dec 31, 2008	Dec 31, 2007
ASSETS
Intangible assets	18	126,804	83,928
Tangible assets	19	85,904	246,359
Non-current receivables	22	38,051	5,309
Deferred tax assets	17	90,779	76,616
Total non-current assets		341,538	412,212
Inventories	23	309,702	333,608
Tax receivables		2,128	2,122
Trade receivables	34	206,892	253,295
Prepaid expenses and accrued income	25	136,549	38,754
Other receivables	24	8,234	16,010
Cash and cash equivalents		371,384	450,662
Total current assets		1,034,889	1,094,451
TOTAL ASSETS		1,376,427	1,506,663
EQUITY AND LIABILITIES
Equity
Share capital		39,167	39,167
Other contributed capital		855,400	855,400
Reserves		1,498	-5,766
Retained earnings incl. profit/loss for the year		-7,489	18,663
Total equity		888,576	907,464
Liabilities
Non-current interest-bearing liabilities	27	148,077	180,901
Non-current provisions	28	7,719	5,536
Deferred tax liabilities	17	22,021	20,903
Total non-current liabilities		177,817	207,340
Current interest-bearing liabilities	27	15,177	65,506
Advance payments from customers		99,580	139,346
Trade payables		20,178	43,011
Tax liabilities		5,277	3,758
Other liabilities	29	22,363	7,925
Accrued expenses and deferred income	30	128,607	119,282
Warranty provisions	31	18,852	13,031
Total current liabilities		310,034	391,859
Total liabilities		487,851	599,199
TOTAL EQUITY AND LIABILITIES		1,376,427	1,506,663

MICRONIC 2008

COMMENTS ON THE CONSOLIDATED BALANCE SHEET AND CASH FLOW STATEMENT

Assests

At year-end 2008 the Group's total assets amounted to SEK 1,376 million, a decrease of 9 percent from SEK 1,507 million the year before.

The Group's non-current assets fell by SEK 72 million to SEK 341 million. Intangible assets amounted to SEK 127 million (84) and consisted primarily, SEK 125 million, of capitalized development costs. In 2008 Micronic amortized previously capitalized development costs in an amount of SEK 24 million (115) at the same time that new development projects were capitalized in an amount of SEK 72 million (34), equal to net amortization of SEK 48 million for 2008. Net amortization in 2007 amounted to SEK 81 million. The effect of this in 2008 was positive by SEK 129 million. The decrease in amortization compared to the prior year is explained by the fact that development of the Sigma was fully amortized at year-end 2007, after which projects with remaining amortization have decreased significantly.

At the same time, capitalization of new development projects related to the Prevision-10 was started in 2008. Each development project is assessed individually to determine whether the criteria for capitalization have been met. The value of intangible assets is reviewed for impairment quarterly to ensure accurate reporting. The property in Täby was sold in the fourth quarter of 2008 and is now used according to a lease-back arrangement. Tangible assets have thus decreased from SEK 246 million to SEK 86 million. The year's capital expenditure totaled approximately SEK 11 million, while depreciation amounted to around SEK 48 million.

Trade receivables at year-end 2008 amounted to SEK 207 million (253). Most shipments in the fourth quarter took place late in the year, which explains the high level in relation to sales. Cash and cash equivalents fell by SEK 80 million in 2008 and amounted to SEK 371 million at the end of the year.

Liabilities

The Group's interest-bearing liabilities decreased during 2008, mainly due to the fact that all property-related loans were repaid in connection with the sale of the Täby property. The Group's current operating liabilities have fallen by SEK 31 million and at year-end amounted to SEK 295 million (327). Trade payables were down by SEK 23 million to SEK 20 million (43) and advance payments from customers decreased by SEK 39 million to SEK 100 million (139). The advance payments are tied to the existing order backlog at year-end. As far as possible, Micronic strives to obtain advance payment from customers when an order is placed.

Cash flow in 2008, capital expenditure and financing

The Group's cash and cash equivalents at December 31, 2008, amounted to SEK 371 million (451) and consolidated cash flow for the year was negative at SEK -83 million. Net cash of SEK 106 million (77) was utilized in operating activities. Operating cash flow consists of net profit adjusted for non-cash items such as depreciation, amortization and changes in working capital.

The Group's total capital expenditure in 2008, excluding the property sale, amounted to SEK 83 million (45). The year's capital expenditure consists of capitalized development costs, SEK 72 million (34) and other investments of SEK 11 million (11), which refer mainly to a geothermal heating system as well as computers and production equipment. The geothermal heating system was later sold in connection with the property sale. The investments have been made primarily in Sweden.

The property sale generated a positive cash flow of SEK 176 million. Of the sale price of SEK 208 million, SEK 32 million has been deposited as security for future lease payments and is recognized as a non-current asset. The deposit is interest-bearing and will be released over the term of the lease. The Group's financing activities in 2008 utilized net cash of SEK 102 million (54). All property-related loans, totaling SEK 82 million, have been redeemed. Liabilities attributable to finance leases have been have been reduced by approximately SEK 10 million. Net borrowing in the Group has otherwise decreased by SEK 10 million, of which the bulk is attributable to the subsidiaries. The equity/assets ratio at year-end was 65 percent (60).

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The share capital consists of 39,166,616 (39,166,616) shares. All shares are of the same class and each share carries one vote.

SEK thousand	Share capital	Other contributed capital	Reserves			Retained earnings	Total equity
			Hedge reserve	Revaluation reserve	Translation reserve
Opening balance, January 1, 2007	39,167	855,400	-	-	-6,474	221,753	1,109,846
The year's foreign exchange differences					-3,618		-3,618
Recognized in hedge reserve			11,444				11,444
Transferred to profit and loss			-5,832				-5,832
Tax attributable to items recognized directly in equity			-1,571		285		-1,286
Total income and expenses recognized directly in equity, excl. transactions with shareholders			4,041		-3,333		708
Profit/loss for the year						-207,541	-207,541
Total recognized income and expenses, excl. transactions with shareholders			4,041		-3,333	-207,541	-207,541
Equity-settled share-based payments according to IFRS 2						4,451	4,451
Closing balance, December 31, 2007	39,167	855,400	4,041	-	-9,807	18,663	907,464
The year's foreign exchange differences					16,457		16,457
Recognized in hedge reserve			-7,629				-7,629
Transferred to profit and loss			-1,788				-1,788
Tax attributable to items recognized directly in equity			2,572		-2,349		223
Total income and expenses recognized directly in equity, excl. transactions with shareholders			-6,845		14,108		7,264
Profit/loss for the year						-30,645	-30,645
Total recognized income and expenses, excl. transactions with shareholders			-6,845		14,108	-30,645	-23,380
Equity-settled share-based payments according to IFRS 2						4,492	4,492
Closing balance, December 31, 2008	39,167	855,400	-2,804	-	4,301	-7,489	888,576

The translation reserve contains foreign exchange differences arising on translation of foreign operations after January 1, 2004.

MICRONIC 2008

Parent Company

PROFIT AND LOSS ACCOUNT

SEK thousand	Notes	2008	2007
Net sales	6	433,395	412,423
Cost of goods sold	5	-304,038	-303,083
Gross profit		129,357	109,340
Research and development expenses	11	-200,720	-199,450
Selling expenses		-84,477	-84,464
Administrative expenses		-40,726	-47,746
Other operating income	10	127,733	7,891
Other operating expenses	10	-21,258	-12,565
Operating profit/loss	5	-90,091	-226,994
Result from financial investments
Interest income and similar items	15	14,198	15,153
Interest expense and similar items	15	-10,183	-9,104
Profit/loss after financial items		-86,076	-220,945
Appropriations
Reversal of excess depreciation	26	5,451	-
Profit/loss before tax		-80,625	-220,945
Tax	17	15,114	62,538
Profit/loss for the year		-65,511	-158,407

CASH FLOW STATEMENT

SEK thousand	Notes	2008	2007
Operating activities
Profit/loss after financial items		-86,076	-220,945
Adjustments for non-cash items
Depreciation/amortization and impairment		44,025	65,772
Unrealized foreign exchange differences		19,006	5,506
Capital gains on the sale of non-current assets		-97,113	7,551
Other non-cash items		89,927	-16,344
		-30,231	-158,460
Changes in working capital
Inventories		-26,774	-7,599
Trade receivables		-9,785	-128,686
Other receivables		-74,129	61,702
Trade payables		-22,835	-20,893
Other liabilities		-33,616	118,330
Cash flow from operating activities		-197,370	-135,606
Investing activities
Investments in intangible assets	18	-	-997
Investments in tangible assets	19	-13,717	-8,782
Sale of tangible assets	19	207,663	-
Cash flow from investing activities		193,946	-9,779
Financing activities
Repayment of debt		-82,583	-35,116
Cash flow from financing activities		-82,583	-35,116
The year's cash flow		-86,007	-180,501
Cash and cash equivalents at beginning of year		423,746	604,247
Cash and cash equivalents at end of year		337,739	423,746
Additional information
Interest received and paid
Interest received		13,386	14,527
Interest paid		-8,672	-9,737
		4,714	4,790
Other non-cash items
Write-down of inventory/obsolescence		67,770	3,361
Restructuring reserve		11,225	-
Changes in reserves for setup, warranty and commissions		6,928	-33,514
Costs for the employee stock option program		4,492	4,451
Changes in reserve for variable salary		-488	9,359
		89,927	-16,344

44
MICRONIC 2008

BALANCE SHEET

SEK thousand	Notes	Dec 31, 2008	Dec 31, 2007
ASSETS
Non-current assets
Intangible assets	18	1,636	6,425
Tangible assets	19	78,894	233,453
Financial assets
Participations in group companies	20	24,677	24,677
Receivables from group companies	21	33,507	26,209
Other non-current receivables	22	29,880	80
Deferred tax asset	17	85,424	72,807
Total financial assets		173,488	123,773
Total non-current assets		254,018	363,651
Current assets
Inventories	23	262,005	284,087
Current receivables
Trade receivables		161,576	168,458
Receivables from group companies		9,332	52,894
Other receivables	24	8,027	7,998
Tax assets		1,166	1,196
Prepaid expenses and accrued income	25	129,416	40,154
Total current receivables		309,517	270,700
Cash and cash equivalents		337,739	423,746
Total current assets		909,261	978,533
TOTAL ASSETS		1,163,279	1,342,184
Pledged assets and contingent liabilities
At December 31
Pledged assets	32	89,000	191,000
Contingent liabilities	33	98,420	99,472
SEK thousand	Notes	Dec 31, 2008	Dec 31, 2007
---	---	---	---
EQUITY AND LIABILITIES
Restricted equity
Share capital		39,167	39,167
Statutory reserve		861,637	861,637
		900,804	900,804
Non-restricted equity
Fair value reserve		2,481	-4,144
Accumulated deficit		-52,731	101,184
Profit/loss for the year		-65,511	-158,408
		-115,761	-61,368
Total equity		785,042	839,436
Untaxed reserves	26	-	5,451
Non-current liabilities
Interest-bearing liabilities to credit institutions	27	-	79,142
Other interest-bearing liabilities	27	142,162	89,998
Total non-current liabilities		142,162	169,140
Current liabilities
Interest-bearing liabilities to credit institutions	27	-	3,440
Other interest-bearing liabilities	27	-	33,157
Advance payments from customers		83,864	130,774
Trade payables		15,174	38,009
Other liabilities	29	4,046	4,507
Accrued expenses and deferred income	30	114,139	105,239
Warranty provisions	31	18,852	13,031
Total current liabilities		236,075	328,157
TOTAL EQUITY AND LIABILITIES		1,163,279	1,342,184

The share capital consists of 39,166,616 (39,166,616) shares. The shares are of the same class and each share carries one.

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

SEK thousand	Restricted equity		Non-restricted equity		Total equity
	Share capital	Statutory reserve	Fair value reserve¹)	Accumulated deficit incl. loss for the year
Opening balance, January 1, 2007	39,167	861,637	-3,411	96,733	994,126
Translation differences recognized directly in equity			-1,018		-1,018
Tax attributable to items recognized directly in equity			285		285
Total income and expenses recognized directly in equity excl. transactions with shareholders			-733		-733
Profit/loss for the year				-158,408	-158,408
Total recognized income and expenses, excl. transactions with shareholders			-733	-158,408	-159,141
Equity-settled share based payments according to IFRS 2				4,451	4,451
Closing balance, December 31, 2007	39,167	861,637	-4,144	-57,224	839,436
Translation differences recognized directly in equity			9,122		9,122
Tax attributable to items recognized directly in equity			-2,497		-2,497
Total income and expenses recognized directly in equity excl. transactions with shareholders			6,625		6,625
Profit/loss for the year				-65,511	-65,511
Total recognized income and expenses, excl. transactions with shareholders			6,625	-65,511	-58,886
Equity-settled share based payments according to IFRS 2				4,492	4,492
Closing balance, December 31, 2008	39,167	861,637	2,481	-118,243	785,042

¹) The fair value reserve in its entirely comprises the translation reserve.

MICRONIC 2008

Additional information and notes

MICRONIC 2008

NOTE 1. ACCOUNTING POLICIES, GENERAL INFORMATION

Compliance with norms and laws

Micronic Laser Systems AB (publ) and its subsidiaries, together comprising the Group, are engaged in the development, manufacture and sale of advanced laser pattern generators for the production of photomasks. All manufacturing takes place in Sweden, while sales are generated almost exclusively outside Sweden. The subsidiaries are based in Japan, South Korea, the US, and Taiwan. The Parent Company is quoted on the NASDAQ OMX Nordic Exchange, Stockholm List, in the category Small Cap, Information Technology.

The consolidated annual report has been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations of these issued by the International Financial Reporting Interpretations Committee (IFRIC) as endorsed by the European Commission for application in the EU. Furthermore, the Swedish Financial Reporting Board's recommendation RFR 1, Supplementary Accounting Rules for Groups, is applied. The accounting policies of the Group are unchanged compared with the preceding year. The new and changed standards and interpretations that have been issued by the IASB and IFRIC and endorsed for application in the EU as of 2008 have not had any impact on the Group's financial reports.

The IASB has adopted new and/or revised IFRSs and interpretations that will be introduced for the financial years 2009 and 2010. A revised IAS 1, Presentation of Financial Statements, is mandatory as of 2009. A revision of IAS 23, Borrowing Costs, is also mandatory as of 2009 but is not expected to have any impact on Micronic which has no loans of significant size. IFRS 8, Operating Segments, is mandatory as of 2009 but will not affect the Group, which consists of a single segment. A revised IFRS 3, Business Combinations, is mandatory as of 2010 but is not expected to affect Micronic which has only wholly owned subsidiaries. IAS 27, Consolidated and Separate Financial Statements, has also been revised and is mandatory from 2010.

The Parent Company applies the same accounting policies as in 2007. Any deviations between the policies applied by the Parent Company and the Group are a result of the Swedish Annual Accounts Act's limitations on the scope for IFRS conformity in the Parent Company and of the exemption rules in RFR 2. Accounting for Legal Entities, arising from the connection between accounting and taxation.

Approval

These financial statements for the Parent Company and the Group were approved for publication on February 23, 2009, and will be submitted to the Annual General Meeting for adoption on April 1, 2009.

Basis of valuation

The closing date is December 31. Assets and liabilities are stated at cost, unless otherwise specified. The functional currency of the Parent Company is Swedish kronor (SEK), which is also the presentation currency of the Parent Company and the Group. This means that the financial statements are presented in SEK. All amounts are stated in SEK thousands unless otherwise specified.

Accounting estimates and classifications

The preparation of financial reports in compliance with IFRS requires the company's management to make certain accounting judgements, estimates and assumptions that affect the reported amounts of assets and liabilities on the closing date and the reported amounts of revenues and expenses during the reporting period. The actual results may differ from these estimates. The areas that contain a large degree of estimates, which are complex or where the assumptions and estimates are of material significance for the consolidated financial statements, are specified in Note 4.

Non-current assets and liabilities essentially consist of amounts that are expected to be recovered or settled more than 12 months after the closing date.

Current assets and current liabilities essentially consist of amounts that are expected to be recovered or settled within 12 months from the closing date. Where applicable, any deviations from these principles for settlement or payment are specified in a note to the affected balance sheet item.

NOTE 2. ACCOUNTING POLICIES OF THE GROUP

Principles of consolidation

Subsidiaries include all companies in which the Parent Company has the ability, directly or indirectly, to govern the operating and financial policies in a manner normally determined by the ownership of more than 50 percent of the voting stock. Subsidiaries are included in the consolidated financial statements from the date on which control passes to the Group and up to the date on which control passes from the Group.

The consolidated financial statements have been prepared in accordance with the purchase method of accounting.

All intra-group income and expenses, receivables and liabilities, and unrealized gains on transactions between group companies are eliminated in full on consolidation.

Foreign currency translation

Functional currency

Items included in the financial statements of the Group's subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (functional currency).

Transactions and balances

Transactions in foreign currency are translated to the functional currency at the rate of exchange ruling on the transaction date.

Sales transactions in foreign currency are translated at the spot rate with the exception of sales of spare parts, for which an approximative exchange rate for the month is used. When a contracted sale is hedged, the cumulative gain or loss on the hedging instrument, normally a forward exchange contract, is recognized in the profit and loss account when the hedged sales transaction affects profit or loss.

Monetary assets and liabilities in foreign currency are translated to the functional currency at the closing day rate. Foreign exchange gains/losses arising on translation are recognized in the profit and loss account. Non-monetary assets and liabilities carried at cost are translated at the rate of exchange ruling on the transaction date. Non-monetary assets and liabilities carried at fair value are translated to the functional currency at the rate of exchange ruling on the date when the fair values were determined. Forward exchange contracts are used to protect assets and liabilities from foreign exchange risk. Hedge accounting is not applied for offsetting of foreign exchange risk since a financial hedge is reflected in the accounts in that both the underlying asset/liability and the hedging instrument are translated at the closing day rate of exchange while changes in exchange rates are recognized through profit or loss. Foreign exchange differences arising on operating receivables and liabilities are recognized in operating profit, while exchange differences arising on financial assets and liabilities are recognized among financial items.

Financial statements of foreign operations

Assets and liabilities in foreign group companies are translated from that company's functional currency to SEK at the closing day rate of exchange. Revenue and expenses in the respective group company's profit and loss account are translated to SEK at the average rate of exchange that is a reasonable approximation of actual rates on the respective transaction dates. The average rate is calculated on quarterly basis. All exchange differences arising from the translation of foreign operations are recognized in a separate translation reserve within consolidated equity.

Net investments in foreign operations

Exchange differences arising on translation of long-term loans that form part of the net investment in a foreign operation are deferred to a translation reserve in equity together with the related tax effects.

Investments in foreign subsidiaries are not hedged.

Cumulative translation differences are presented in a separate component of equity and include translation differences arising after the date of transition to IFRS (January 1, 2004). When a foreign operation is disposed of, the cumulative exchange differences relating to that foreign operation are recognized in consolidated profit or loss.

FINANCIAL REPORTS

Segment reporting

The company's business is based on development, manufacturing and marketing of extremely accurate laser pattern generators for the production of photomasks. The systems are used by electronics companies to manufacture photomasks for displays and semiconductors. The systems for photomask production are produced in a similar way despite different application areas, are distributed in a similar manner and are largely sold to the same customers regardless of application area. Micronic considers itself to be a one-product company and its business risks to be primarily product-related. Consequently, the company's primary segment consists of a single product area, while secondary segment comprises the geographical markets where the company operates.

Intangible assets

Capitalized costs for business systems

Capitalized costs for business systems are recognized at cost with a deduction for accumulated amortization. The investment in a business system refers to costs incurred for adaptation and implementation of a fully integrated business system and consists of both internally generated and externally acquired assets. Capitalized costs for business systems are amortized straight-line over the expected useful life of the asset, which is three years. Amortization is started when the business system is ready for use.

Costs for maintenance of the business system are expensed as incurred.

Capitalized development costs

Costs related to research undertaken with the prospect of gaining new scientific or technical knowledge in the Group's operations are expensed as incurred.

Development projects where knowledge and understanding gained from research and practical experience are directed towards producing new products, processes or systems are recognized as intangible assets in the balance sheet when they meet the criteria for capitalization. Development costs may be capitalized if, and only if, the company can demonstrate the technical feasibility of completing the intangible asset, the intention and ability to complete the asset and use or sell it, the probability that the asset will generate future economic benefits, the availability of adequate resources to complete the development and to use or sell the asset and the ability to reliably measure the costs attributable to the asset during its development. The reported value includes all directly attributable costs, such as those for materials, salaries and compensation to employees engaged in R&D activities.

Other development costs are expensed in the profit and loss account for the period in which they arise.

Individual assessment is made of all ongoing research and development projects to determine which costs for the respective project are capitalizable and to look for any indications of impairment.

Amortization of capitalized development costs is started when the respective development project is completed, normally when it begins generating revenue, and is carried out on a straight-line basis over a period of three years.

License

The license is linked to patent rights in the maskless lithography application area. Amortization of this license was started at the end of 2003 on a straight-line basis over a period of five years based on the expected useful life of the asset.

Tangible assets

Items of property, plant and equipment are initially measured at capitalized cost less accumulated depreciation. Buildings and land refer to the Group's property and production facility in Täby outside Stockholm, which also contains office premises. The building itself and the related permanent equipment have been divided into a number of components with different expected useful lives. The components defined for the building are frame and foundation, heating and ventilation, exterior and insulation, roofing, elevators, high tension installations and other. Permanent equipment includes permanent modifications to the property, such as cleanroom facilities.

The balance sheet item "equipment" includes self-produced equipment that is used primarily for research and development as well as test and training equipment.

Borrowing costs attributable to the construction or production of an asset are not capitalized as part of the cost of that asset.

Subsequent expenditure is added to the recorded value of an asset or recognized as a separate asset when it is probable that the future economic benefits associated with the asset will flow the Group and the cost of the asset can be measured reliably. All other types of repair and maintenance are expensed in the profit and loss account for the period in which they arise.

Land is not depreciated. Other tangible assets are depreciated on a straight-line basis over the expected useful lives, starting from the month of completion or acquisition as follows:

Building components
Frame and foundation	60 years
Heating and ventilation	30 years
Exterior and insulation	40 years
---	---
Roofing	30 years
Elevators	30 years
High tension installations	20 years
Other	15 years
Other tangible assets
Land improvements	20 years
Cleanroom facilities	10 years
Other permanent equipment	5–40 years
Machinery and equipment	5 years
Computers	3 years

The balance sheet item "other permanent equipment" is of lesser significance and includes components such as boilers and lightning conductors.

Gains/losses on the sale of tangible assets are calculated as the difference between the net realizable value and carrying amount of the item and are recognized over the profit and loss account among other operating income/expenses.

Property lease

The sold property is leased back through a sale and lease-back arrangement. As a result of the terms of the agreement between the company and the lessor, the property lease is classified as an operating lease. The leasing charge, consisting of a fixed portion and an interest portion, is recognized as a lease expense in the profit and loss account.

Leases

Leases for machinery and equipment where the risks and rewards incident to ownership have been substantially transferred to the Group are classified as finance leases. Assets held through finance leases are reported in the consolidated balance sheet as non-current assets and are depreciated according to the same principles as other tangible assets. The corresponding obligation to pay future leasing charges is reported in the balance sheet under interest-bearing liabilities. The lease expense is reported in the consolidated profit and loss account within depreciation and interest expenses. Each lease payment is divided between amortization of the lease liability and interest expense according to the annuity principle.

Other leases are classified as operating leases. In these cases, the lease expense is reported within operating expenses, although not depreciation, in the consolidated profit and loss account.

Financial instruments

The financial assets recognized in the balance sheet include cash and cash equivalents, trade receivables and derivatives. Financial liabilities and equity include trade payables, loans payable and derivatives.

Recognition and derecognition

A financial asset or liability is recognized in the balance sheet when the company initially becomes party to the contractual provisions of the instrument. Trade receivables are recorded in the balance sheet when an invoice has been sent. Financial liabilities are recognized when the counterparty has performed and there is contractual obligation to pay, even if no invoice has been received. Trade payables are recorded when an invoice has been received.

A financial asset is derecognized from the balance sheet when the company's rights under the agreement are realized, expire or the company has relinquished control of the asset. The same applies to a part of a financial asset. A financial liability is derecognized from the balance sheet when the obligation specified in the agreement is discharged or otherwise extinguished. The same applies to a part of a financial liability.

A financial asset and a financial liability are set off and netted in the balance sheet only when a legal right of setoff exists and there is an intent and ability to set off and net these items or to simultaneously realize the asset and settle the liability.

The regular way purchase or sale of a financial asset is recognized on the trade date, which is the date on which the company commits to purchase or sell the asset.

Classification and valuation

Non-derivative financial instruments are initially measured at cost, corresponding to fair value including transaction costs for all financial assets and liabilities not measured at fair value through profit or loss, which are measured at fair value less transaction costs.

The fair value of a listed financial asset is equal to the asset's quoted market price on the closing date. The Group has no such assets. The fair value of unlisted financial assets is established by using valuation techniques (see also information about derivatives in Note 35).

On initial recognition, a financial instrument is classified based on the intent for acquisition of the financial instrument. Subsequent measurement depends on how the instruments have been classified upon initial recognition.

MICRONIC 2008

Micronic uses the following categories:

Financial assets at fair value through profit or loss

This category consists of two subgroups – financial assets held for trading and other financial assets which the company has designated to this category on initial recognition. Assets in this category are subsequently measured at fair value with fair value changes in profit or loss. A financial asset is classified as held for trading when it is acquired for the purpose of selling in the short term. Derivatives are classified as held for trading except when used for hedging.

Derivatives are classified as held for trading when hedge accounting has been discontinued. For financial assets other than those held for trading, the company has chosen not to classify these as financial assets at fair value through profit or loss (fair value option).

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market. These are included in current assets, with the exception of items maturing more than 12 months from the closing date which are classified as non-current assets. Assets in this category are recognized at amortized cost. “Trade receivables” and “other receivables” in the balance sheet belong to the category “Loans and receivables”. Cash and cash equivalents are also included in this category.

Financial liabilities at fair value through profit or loss

This category consists of financial liabilities held for trading and derivatives not designated as hedging instruments. Liabilities in this category are subsequently measured at fair value and changes in fair value are recognized in the profit and loss account. A financial liability is classified as held for trading when it is acquired for the purpose of selling in the short term. Derivatives are classified as held for trading when hedge accounting is discontinued. For financial liabilities other than those held for trading, the company has chosen not to classify these financial liabilities at fair value through profit or loss.

Other financial liabilities

Financial liabilities not held for trading are measured at amortized cost less transaction costs. This category includes the Group's loans payable, finance lease liabilities and trade payables.

Derivatives used for hedging purposes

All derivatives are measured at fair value in the balance sheet. Changes in the fair value of derivatives designated as fair value hedges are recognized in profit or loss. Changes in the fair value of derivatives designated as cash flow hedges and hedges of net investments in foreign currency are deferred to a special reserve in equity and are transferred to the profit and loss account when the hedged item is recognized in profit or loss.

Derivatives and hedge accounting

Derivatives consist of forward exchange contracts that are entered into reduce transaction exposure in foreign currencies and are not used for speculative purposes. Derivatives are recognized in the balance sheet and are stated at fair value. The method for reporting gains/losses arising on changes in the fair value of a derivative depends on whether the derivative has been identified as a hedge instrument and, in such case, the nature of the hedged risk. In hedge accounting, the Group identifies derivatives as:

a hedge of the exposure to changes in the fair value of a recognized asset or liability or a previously unrecognized firm commitment (fair value hedge)
a hedge of the exposure to variability in cash flows attributable to a highly probable forecast transaction or the hedge of foreign exchange risk in a firm commitment (cash flow hedge)
a hedge of a net investment in a foreign operation

At present, only cash flow hedges are used.

When a contract is entered into, the relationship between the hedge instrument and the hedged risk is formally documented, including the company's risk management objective and strategy for undertaking the hedge. The Group also documents its assessments, both at the inception of a hedge and at each reporting date, on the effectiveness of the derivatives used in the hedge transaction in offsetting changes in the fair value or cash flows of the hedged item.

Changes in the hedge reserve in equity are presented in the Statement of Changes in Equity.

In the Group, derivatives used to hedge probable future commercial inflows in foreign currency are reported according to the rules for hedge accounting for cash flow hedges. This means that the effective portion of fair value changes on derivative instruments is recognized in a fair value reserve within equity. The gain or loss attributable to the ineffective portion is recognized immediately in the profit and loss account. The fair value of derivatives is measured as the quoted market prices of the forward exchange contracts on the closing date.

Amounts accumulated in equity are recycled to the profit and loss account when the hedged item is reflected in profit or loss, i.e. upon revenue recognition.

When a hedge instrument expires, is sold or no longer meets the hedge accounting criteria and the cumulative gains/losses are deferred in equity, these are retained in equity until the hedged item is recognized in profit or loss. The effective portion is recognized in net sales when the hedged item affects profit or loss, while the ineffective portion is recognized in other operating income/expense. When a forecast transaction is no longer expected to occur, the cumulative gains/losses deferred in equity are immediately released to the profit and loss account, among other operating income/expense.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and at bank or equivalent institutions and other highly liquid short-term investments that have original maturities of less than three months and are not subject to any material risk for value fluctuations.

The Group had no short-term investments during the financial year.

Trade receivables

Trade receivables are classified as part of the category “loans and receivables”. Trade receivables are stated at the amount in which they are expected to be received after deduction of probable credit losses, which are assessed individually. Trade payables have a short expected term and are stated at the nominal amount without discounting. Write-downs of trade receivables are recorded in operating expenses.

Inventories

Inventories are stated at the lower of cost and net realizable value. Inventories are valued at cost calculated on a First-in, First-out (FIFO) basis and include all costs of purchase, costs of conversion and other costs incurred in bringing the goods to their existing condition and location. Self-produced finished and semi-finished goods are valued at direct production cost including a reasonable share of indirect manufacturing overheads. Net realizable value is the estimated selling price less the estimated cost of completion and the estimated costs necessary to make the sale.

Impairment

The carrying amounts of the Group's assets are reviewed at each balance sheet date to look for any indication that an asset may be impaired.

Impairment testing of tangible and intangible assets and participations in group companies

If there is an indication of impairment, the asset's recoverable amount is calculated. The recoverable amount is the higher of fair value less costs to sell and value in use. The calculation of value in use reflects an estimate of discounted future cash flows. Impairment losses are recognized in the profit and loss account. Impairment testing is done for all tangible and intangible assets, including intangible assets not yet available for use.

Impairment testing of financial assets

A review is carried out at each balance sheet date to look for any indication that a financial asset may be impaired. Indicators of impairment may arise from adverse changes in circumstances that affect the ability to recover an asset's carrying amount or parts of it, such as assessment of trade receivables. The recoverable amount of financial assets carried at amortized cost is measured as the present value of future cash flows discounted at the effective interest rate on initial recognition of the asset. Assets with a short time to maturity are not discounted in calculation of recoverable value. Impairment losses are recognized in the profit and loss account.

Taxation

Current tax refers to tax payable on the year's taxable profit and adjustments in current tax from earlier periods. Deferred tax refers to the tax calculated partly on the basis of temporary differences and partly on taxable deficits. Total tax consists of current tax and deferred tax. Unlike deferred tax, current tax requires immediate payment. Current and deferred tax are reported over the profit and loss account unless the tax refers to items recognized directly in consolidated equity.

In the Group, deferred tax is calculated according to the balance sheet method on the basis of temporary differences between the carrying amount of an asset or liability and its tax base. Deferred tax receivables are recognized to the extent that they are expected to be used against future taxable profits.

Employee benefits

Pension commitments

Pension commitments are normally fulfilled through payment of premiums according to a defined contribution pension plan. These are charged to the profit and loss account for the period in which the employees render the related service.

Other long-term employee benefits

In the Japanese subsidiary, there is a minor long-term employee benefit obligation. When employment ceases, through termination or retirement, the accumulated amount of benefit is paid out immediately.

MICRONIC 2008

FINANCIAL REPORTS

Termination benefits

A provision is recognized on the termination of employees only when the company is demonstrably committed, without realistic possibility of withdrawal, by a detailed formal plan to terminate an employee or group of employees before the normal retirement date. When termination benefits are provided as a result of an offer made to encourage voluntary redundancy, the expense is recognized if it is probable that the offer will be accepted and the number of employees who will accept the offer can be reliably estimated.

Short-term employee benefits

For short-term employee benefits, the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period should be recognized in that period. A provision for the expected cost of bonus payments is recognized when, and only when, the Group has a legal or constructive obligation to make such payments as a result of past events and a reliable estimate of the expected cost can be made.

Share-based payment

A decision was made in 2007 to implement an employee stock option program that will enable the employees to acquire shares in the company. The fair value of granted share options is recognized as a personnel expense with a corresponding increase in equity. Fair value is measured at the date of grant and is recognized over the remaining vesting period. The fair value of the stock options has been measured according to the Black & Scholes method, with consideration to the terms and conditions that applied on the date of grant. The amount recognized as an expense is adjusted to reflect the current number of vested options.

Social security liabilities arising from the employee stock option program are recognized over the same period or periods in which the employees render the services. Provisions for social security expenses are based on the fair market value of the options on the closing date. Fair market value is measured according to the same valuation model used on the date of grant, i.e. Black & Scholes.

Revenue recognition

The company's net sales consist entirely of revenue arising from the sale of goods (systems and system upgrades) and services. Sales are denominated in USD and JPY.

Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to the company and when the amount of revenue can be measured reliably. Revenue arising from the sale of goods to a customer is recognized upon delivery in accordance with the agreed conditions of sale and delivery, i.e. when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is reported net of any discounts.

Revenue relating to the sale of services, primarily linked to service agreements, is recognized upon provision of the service. Payments due under service agreements are invoiced in advance and are progressively recognized over the term of the agreement.

Expense recognition

In connection with the delivery of goods and recognition of income from a sale, all expenses related to the delivered goods are recognized in the profit and loss account. These expenses include all estimated remaining costs at the time of delivery, including provisions for setup and warranties, which are reported under "Accrued expenses" and "Warranty provisions" in the balance sheet. The cost of setting up a system at a customer site is easy to estimate and is relatively small in relation to the value of the system as a whole. After setup is completed, the warranty period begins and normally lasts for twelve months. These costs are assessed on an individual basis and are relatively easy to predict, based on previous experience.

Costs for the provision of services are expensed as incurred.

Interest income and expense

Interest income on receivables and interest expense on liabilities are recognized in the profit and loss account for the period in which they arise.

No portion of interest expense is capitalized in the balance sheet.

Interest income on receivables and interest expense on liabilities is calculated using the effective interest method.

Interest income and expense are recorded on an accruals basis and include amortized transaction costs or other differences between the initial carrying amount of the receivable or liability and the sum of the amount to be settled at maturity and estimated future cash payments or receipts over the life of the receivable or liability. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or liability. Calculation of the effective interest rate takes into account fees receivable, that are an integral part of the instrument's yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs.

Operating expenses

The Group's expenses mainly refer to materials and supplies, personnel costs and other external expenses, primarily consisting of consulting fees. An assessment is made of costs incurred but not invoiced by suppliers for work performed during the financial year, and a corresponding provision is recognized in "Accrued expenses" in the balance sheet. Individual assessment is made of all ongoing research and development projects. Costs related to research are expensed as incurred. Costs for development projects that meet the criteria for capitalization are reported as intangible assets.

Earnings per share

Basic earnings per share are calculated on consolidated profit for the year attributable to equity holders in the Parent Company divided by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated on profit for the period and the average number of shares outstanding adjusted for the effects of all dilutive potential ordinary shares, which during the reported periods consisted of options/warrants granted to employees. Dilution arises only when the strike price of the options/warrants falls below the market price, and increases in proportion to the difference between the strike price and market price. Earnings per share are not affected when the company records a loss or when the strike price exceeds the market price.

NOTE 3. PARENT COMPANY ACCOUNTING POLICIES

The annual financial statements of the Parent Company are presented in accordance with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2, Accounting for Legal Entities. The Swedish Financial Reporting Board's statements for listed enterprises are also applied. RFR 2 states that in the report for the legal entity, the Parent Company shall apply all EU-endorsed IFRSs and statements as far as possible within the framework of the Annual Accounts Act and with respect to the connection between accounting and taxation. The areas where the accounting policies of the Parent Company differ from those of the Group are described below.

Changes in accounting policies

The financial statements of the Parent Company are presented in accordance with the same accounting policies applied in 2007. For a description of future changes in the applied accounting policies due to new or revised standards, see Compliance with laws and norms, on page 46.

Development costs

All costs, for both research and development, are expensed as incurred.

Leases

The Parent Company classifies all leases as operating leases, which means that the lease expense is recorded as an operating expense in the profit and loss account.

Taxation

In the Parent Company, untaxed reserves are reported gross including the deferred tax portion. In the Group, however, untaxed reserves are divided between deferred tax liability and equity.

Subsidiaries

In the Parent Company, shares in subsidiaries are accounted for according to the purchase method.

Intra-group receivables that comprise net investments in foreign operations

The Parent Company's long-term loans to a foreign operation that form part of the Parent Company's net investment in the foreign operation are translated at the closing day rate of exchange. Foreign exchange differences arising on translation of such monetary items are recorded separately within a translation reserve in equity.

Derivatives and hedge accounting

In view of the changed rules in RFR 2 and the connection between accounting and taxation, the rules on financial instruments and hedge accounting in IAS 39 are not applied by the Parent Company as a legal entity and will continue to be applied only in the Group. Derivatives consist of forward exchange contracts that are used to reduce transaction exposure in foreign currencies for which hedge accounting is applied. Derivatives are not recorded in the balance sheet in cases where the hedged item is held off-balance sheet. When recognized in the balance sheet, the hedged item is measured with respect to the effects of the hedging instrument. In cases where receivables and liabilities are hedged against foreign exchange risk, the hedged asset or liability is measured at the exchange rate prevailing on the hedging date.

MICRONIC 2008

50
MICRONIC 2008

NOTE 4. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with IFRS requires the management to make assumptions that affect the application of the Group's accounting policies. When preparing the financial statements, the company's management is also required to make certain estimates and assumptions about the future that affect the reported amounts of assets and liabilities on the closing date and the reported amounts of revenues and expenses during the reporting period. The actual results may differ from these estimates. The significant assumptions and estimates are specified below.

Capitalized development costs

Development projects where knowledge gained from research and practical experience are directed towards producing new products, processes or systems are recognized as intangible assets in the balance sheet when they meet the criteria for capitalization. Development costs may be capitalized only when the company can demonstrate the technical feasibility of completing the intangible asset, the intention and ability to complete the asset and use or sell it, the probability that the asset will generate future economic benefits, the availability of adequate resources to complete the development and to use or sell the asset and the ability to reliably measure the costs attributable to the asset during its development. The reported value includes all directly attributable costs, such as those for materials, salaries and compensation to employees engaged in R&D activities. Individual assessment is made of all ongoing research and development projects to determine whether these criteria have been met.

However, because it may be difficult to distinguish between research and development projects, this judgment can be affected by individual interpretations.

Useful life and impairment of capitalized development costs

The company regularly reviews capitalized development costs to look for any indication of impairment. Each development project is individually tested for impairment through a quarterly estimation of discounted future cash flows that includes intangible assets not yet completed.

This valuation is made and judged by the company's management and is also reviewed by the audit committee.

Amortization of intangible assets is based on the estimated useful life of the asset. Depending on which useful life is determined for an asset, this can have a significant impact on Group's reported profit. The expected residual value of an intangible asset at the end of its useful life is always set at zero.

Amortization of capitalized development costs is started when the respective development project is completed, normally when it begins generating revenue. At that time, a straight-line amortization is started over a three-year period.

This judgment can have a large impact on the Group's reported profit.

Warranty and installation commitments

In connection with delivery of systems and recognition of income from the sale, provisions are made for setup and warranty expenses. The costs for setting up a system at a customer site are easy to assess and are relatively small in relation to the value of the system as a whole. When setup is completed, a warranty period begins and normally lasts for 12 months. These expenses are estimated on an individual basis and are comparatively easy to determine based on previous experience.

NOTE 5. ITEMS AFFECTING COMPARABILITY

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Cost of goods sold
Write-down of component inventories	-67,407	-	-58,998	-
Other income and expenses
Property sale	97,772	-	97,772	-
Restructuring of operations in Sweden	-14,837	-	-14,837	-
Operating profit	15,528	-	23,937	-

Operating profit for 2008 was affected by one-time items. Costs for the write-down of component inventories are recognized in costs of goods sold. Other income and expenses include the capital gain on the sale of the property in Täby and costs for restructuring of operations in Sweden, which led to a staff reduction of 27 employees.

NOTE 6. SEGMENT REPORTING

	GROUP		PARENT COMPANY
Net sales by market	2008	2007	2008	2007
Europe	258	2,541	258	2,541
USA	106,442	16,628	93,787	4,934
Asia	461,917	503,812	339,350	404,948
Total	568,617	522,981	433,395	412,423
of which, sale of goods	386,848	358,976	389,876	365,639
of which, sale of services	181,769	164,005	43,519	46,784
	568,617	522,981	433,395	412,423

Intra-group transactions:

Of the year's purchases, 6 percent (8) was attributable to group companies. Of the year's sales, 11 percent (17) was attributable to group companies.

GROUP 2008
Assets	Asia	USA	Europe
Intangible assets	-	-	126,804
Other non-current assets	24,331	1,270	189,133
Inventories	38,758	8,939	262,005
Current receivables	41,306	3,630	308,867
Cash and cash equivalents	29,951	3,610	337,823
	134,346	17,449	1,224,632
Capital expenditure
Capitalized development	-	-	71,886
Other non-current assets	915	178	10,218
	915	178	82,104
GROUP 2007
---	---	---	---
Assets	Asia	USA	Europe
Intangible assets	-	-	83,928
Other non-current assets	17,767	1,482	310,232
Inventories	41,531	7,989	284,087
Current receivables	88,414	2,821	217,750
Cash and cash equivalents	23,330	3,506	423,826
	171,042	15,798	1,319,823
Capital expenditure
Intangible assets	-	-	34,141
Tangible assets	276	323	10,989
	276	323	45,130

NOTE 7. OPERATING EXPENSES

	GROUP
	2008	2007
Costs allocated by function and cost type (excl. work performed by the company for its own use and capitalized)
Raw materials and consumables	182,356	109,930
Changes in product inventories and products in progress	15,466	39,287
Personnel costs	332,086	344,007
Depreciation/amortization	72,421	193,965
Other external costs	200,778	178,526
	803,107	865,715

Financial reports

NOTE 8. DEPRECIATION/AMORTIZATION BY FUNCTION

Group 2008	Business system	Development expenses	License	Buildings and land	Machinery	Equipment	Total
Cost of goods sold	754	–	–	1,411	492	18,535	21,192
Research and development expenses	691	–	–	1,566	–	18,764	21,021
Research and development, capitalized development	–	24,221	–	–	–	–	24,221
Selling expenses	62	–	–	141	–	386	589
Administrative expenses	149	–	3,132	340	–	1,777	5,398
	1,656	24,221	3,132	3,458	492	39,462	72,421
Group 2007
Cost of goods sold	685	–	–	1,738	466	18,098	20,987
Research and development expenses	561	–	–	1,753	–	48,880	51,194
Research and development, capitalized development	–	114,739	–	–	–	–	114,739
Selling expenses	57	–	–	178	–	970	1,205
Administrative expenses	154	–	3,417	481	–	2,018	6,070
	1,457	114,739	3,417	4,150	466	69,966	194,195
Parent Company 2008
Cost of goods sold	754		–	1,411	492	16,904	19,561
Research and development expenses	691		–	1,566	–	17,169	19,426
Selling expenses	62		–	141	–	386	589
Administrative expenses	149		3,132	340	–	828	4,449
	1,656	–	3,132	3,458	492	35,287	44,025
Parent Company 2007
Cost of goods sold	685		–	1,738	466	16,032	18,921
Research and development expenses	561		–	1,753	–	38,432	40,746
Selling expenses	57		–	178	–	946	1,181
Administrative expenses	154		3,417	481	–	872	4,924
	1,457	–	3,417	4,150	466	56,282	65,772

NOTE 9. FEES FOR AUDITING AND NON-AUDITING SERVICES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Fees and compensation, auditing, etc:
Auditing assignments	1,120	961	937	800
Non-auditing assignments	313	336	283	300

Auditing assignments refer to the auditing of the consolidated financial statements, the accounts and the administration of the board of directors and the President of the company, other tasks that befall on the company's auditor, and advice or other assistance prompted by observations from such audits or the performance of other such tasks. All other work is classified as "non-auditing assignments". In 2008 and 2007, non-auditing assignments included services in a project to develop processes for evaluation of internal control. The AGM elected KPMG as auditor in 2006.

NOTE 10. OTHER OPERATING INCOME/EXPENSES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Other operating income
Foreign exchange gains	18,559	–	23,544	7,714
Capital gain on property sale	97,722	–	97,722	–
Other	5,286	302	6,467	177
	121,567	302	127,733	7,891
of which, exchange rate differences on non-hedge accounting derivatives	–	–	–	7,714
Other operating expenses
Foreign exchange losses	–	7,046	–	6,416
Other	21,611	6,288	21,258	6,149
	21,611	13,334	21,258	12,565
of which, exchange rate differences on non-hedge accounting derivatives	753	710	193	–

NOTE 11. RESEARCH AND DEVELOPMENT EXPENSES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Research and development expenditure	197,308	198,406	200,720	199,450
Capitalized development costs	-71,885	-34,141	–	–
Amortization of previously capitalized development costs	24,221	114,739	–	–
	149,644	279,004	200,720	199,450

MICRONIC 2008

NOTE 12. EMPLOYEES, PERSONNEL COSTS AND REMUNERATION TO SENIOR EXECUTIVES

Remuneration to the board, CEO and other senior executives, 2008
	Board fees	Committee fees	Basic salary	Other remuneration	Variable salary	Other benefits	Pension costs	Employee stock options	Total	Employee stock options, number
Christer Elmehagen, Board Chairman	500	50	–	–	–	–	–	–	550	–
Göran Malm, Vice Chairman	275	50	–	–	–	–	–	–	325	–
Jörgen Centerman	200	50	–	–	–	–	–	–	250	–
Sigrun Hjelmquist	200	50	–	–	–	–	–	–	250	–
Magnus Lindquist	200	50	–	–	–	–	–	–	250	–
Lena Treschow Torell	200	50	–	–	–	–	–	–	250	–
Total remuneration to the board	1,575	300	–	–	–	–	–	–	1,875	–
Sven Löfquist, CEO	–	–	2,339	42	841	70	1,255	409	4,957	75,000
Other senior executives (7 persons)	–	–	8,688	387	1,641	423	2,321	1,324	14,784	245,000
Total remuneration to the CEO and other senior executives	–	–	11,027	429	2,482	493	3,576	1,733	19,740	320,000
Total remuneration to the board, CEO and other senior executives	1,575	300	11,027	429	2,482	493	3,576	1,733	21,615	320,000

Remuneration to the board, CEO and other senior executives, 2007

	Board fees	Committee fees	Basic salary	Other remuneration	Variable salary	Other benefits	Pension costs	Employee stock options	Total	Employee stock options, number
Göran Malm, Board Chairman as of September 17, 2007	286	50	–	–	–	–	–	–	336	–
Lars Nyberg, Board Chairman until September 17, 2007	358	36	330	–	–	–	–	–	724	–
Christer Zetterberg, Vice Chairman	275	50	–	–	–	–	–	–	325	–
Jörgen Centerman	200	50	–	–	–	–	–	–	250	–
Sigrun Hjelmquist	200	14	–	–	–	–	–	–	214	–
Magnus Lindquist	200	50	–	–	–	–	–	–	250	–
Lena Treschow Torell	200	50	–	–	–	–	–	–	250	–
Total remuneration to the board	1,719	300	330	–	–	–	–	–	2,349	–
Sven Löfquist, CEO	–	–	2,160	38	409	70	1,202	385	4,263	75,000
Other senior executives (7 persons)	–	–	8,446	262	1,210	321	2,298	1,254	13,791	245,000
Total remuneration to the CEO and other senior executives	–	–	10,606	300	1,619	391	3,500	1,639	18,054	320,000
Total remuneration to the board, CEO and other senior executives	1,719	300	10,936	300	1,619	391	3,500	1,639	20,403	320,000

Remuneration and benefits of the board of directors

The members of the board, with the exception of the CEO, receive remuneration according to the decision of the 2008 AGM. No fees are paid to the boards of the subsidiaries. Additional fees are paid for work on the audit and nomination committees.

Latest approved principles for remuneration to senior executives

Other senior executives refer to the individuals who, together with the CEO make up the executive management team. For the composition of the management team, see pages 32–33. The principles for remuneration to senior executives are prepared by the board's remuneration committee, after which the board passes a decision on the proposed principles. The principles are then approved by the AGM. In handling matters related to remuneration, external expertise is used when needed. The main principle is to offer senior executives market-based remuneration and other terms of employment. Factors such as expertise, experience and performance are significant in determining the amount of remuneration at the individual level. The total remuneration package consists of basic salary, variable salary, pension benefits in the form of defined benefit pension premiums, other benefits and an incentive scheme consisting of an employee stock option program that includes all employees in the Parent Company. Other benefits consist of company cars and healthcare insurance.

Remuneration and benefits of the CEO

For 2008, basic salary to the CEO amounted to SEK 3,505,956. This is a total compensation which the CEO may, at his own discretion, receive in the form of cash salary and/or for payment of pension premiums to an insurance company. In 2008 the CEO chose to allocate SEK 1,254,830 to pension premiums. There are no other pension obligations with respect to the CEO. The maximum amount of variable remuneration for 2008 is equivalent to 50 percent of basic salary. Variable salary is payable on the attainment of the Group's net profit target and individual earnings-linked goals set by the board. For 2008 the company did not meet the established profit targets. However, variable salary for the individually set goals is payable to the CEO. Variable salary for 2008 has not yet been paid, but a provision has been made in the amount of SEK 841,000, which is equal to 24 percent of basic salary. In 2008, variable salary for 2007 was paid in an amount of SEK 409,000, for which a provision was made in 2007. Under the employee stock option program that was approved by the 2007 AGM, the CEO was granted 75,000 options. The cost of this benefit in 2008 amounted to SEK 409,000 excluding social security expenses. The employment contract with the CEO specifies a mutual notice period of six months. The employment contract, with related benefits, is valid during the

MICRONIC 2008

Note 12, cont'd.

notice period. In the event of dismissal from his duties, the CEO is entitled to 18 months' termination benefits. In cases where termination benefits are received, no other benefits are payable.

The contractual retirement age is 60 years.

Remuneration and benefits of other senior executives

The Micronic Group Management Team during 2008 consisted of 8 persons (8), of whom 1 (1) was a woman.

Variable salary is individualized and the maximum amount is between 30 and 40 percent of basic salary. Variable salary is based on attainment of the Group's net profit target and individual earnings-linked goals set in consultation with the CEO according to guidelines from the board's remuneration committee. For 2008 the company has not met the established profit targets. However, variable salary for the individual goals is payable to other senior executives. Variable salary for 2008 has not yet been paid but a provision has been made in an amount of SEK 1,641,000, which is equal to 19 percent of basic salary. In 2008, variable salary for 2007 was paid in an amount of SEK 975,000, for which a provision was made in 2007. Under the employee stock option program that was adopted by the 2007 AGM, other senior executives have been granted 35,000

options each, for a total of 245,000 options. The cost of this benefit in 2008 was SEK 1,324,000 excluding social security expenses. The pension cost refers to payment of defined benefit pension premiums. Aside from payment of premiums, there are no pension obligations.

The employment contracts with the CFO and SVP Product Management and Sales specify a notice period of nine months in the event of dismissal by the company, in which case these individuals are entitled to termination benefits corresponding 12 months' salary after the period of notice. In cases where termination benefits are received, no other benefits are payable. The employment contract with the SVP Customer Operations, who is also president of the South Korean subsidiary, specify a notice period of two months in the event of dismissal by the company, in which case he is entitled to termination benefits corresponding to two months' salary for every year of service. In cases where termination benefits are received, no other benefits are payable. For other senior executives there is a notice period of six months in the event of dismissal by the company, with termination benefits equal to six months' salary. The employment contract, with related benefits, is valid during the notice period. In cases where termination benefits are received, no other benefits are payable.

Sickness absence as a percentage of scheduled working hours, Parent Company	2008	2007
Total sickness absence	1.73	1.74
of which, sickness absence for a continuous period of 60 days or more	0.87	0.70
Sickness absence for women	3.96	4.12
Sickness absence for men	1.20	1.37
Sickness absence, employees up to 29 years	0.01	0.01
Sickness absence, employees 30–49 years	1.01	3.14
Sickness absence, employees 50 years and older	0.71	2.41
Average number of employees	2008
---	---	---
Parent Company	Women	Men
Sweden	50	235
China	1	-
Total in Parent Company	51	235
Subsidiaries
Japan	10	59
South Korea	3	22
USA	3	11
Taiwan	1	3
Total in subsidiaries	17	95
Total in Group	68	330
Gender distribution in the group management team	2008
---	---	---
Parent Company	% of women	% of men
Board of directors	29	71
Other senior executives	13	87
Total Group
Board of directors	11	89
Other senior executives	9	91

MICRONIC 2008

Note 12, cont'd.

Salaries and other remuneration	2008			2007
Parent Company	Board and senior executives	Other employees	Total	Board and senior executives	Other employees	Total
Sweden, 13 individuals (14)	15,766	138,376	154,142	16,964	148,993	165,957
China	-	76	76	-	60	60
Total in Parent Company	15,766	138,453	154,219	16,964	149,053	166,017
Subsidiaries, 4 individuals (4)	5,105	60,895	66,000	4,653	56,810	61,463
Total in Group	20,871	199,348	220,219	21,617	205,863	227,480

The reported remuneration to employees includes accrued variable salary payable on the attainment of individual goals for 2008 amounting to a total of SEK 11 million excluding social security expenses, of which SEK 6.7 million in the Parent Company. The variable salary is expected to be paid out in March 2009. Expensed share-based payments in the Parent Company amounted to SEK 4.5 million excluding social security expenses and consists of costs for the employee stock option program that was adopted AGM. The total cost of the option program is estimated at approximately SEK 15 million and is accrued over the period ending in March 2010. So far in 2007 and 2008, total costs of SEK 9 million have been recognized.

Total salaries and social security expenses	2008			2007
	Salaries and other remuneration	Social security expenses	Total	Salaries and other remuneration	Social security expenses	Total
Parent Company	154,219	83,591	237,809	166,017	86,366	252,333
(of which, pension costs)		(28,332)			(26,808)
Subsidiaries	66,000	10,252	76,252	61,463	7,516	68,979
(of which, pension costs)		(4,460)			(2,584)
Total in Group	220,219	93,843	314,061	227,480	93,882	321,312
(of which, pension costs)		(32,792)			(29,392)

NOTE 13. EMPLOYEE STOCK OPTION PROGRAM

The Annual General Meeting of Micronic on March 29, 2007, resolved to approve an employee stock option program 2007/2012.

Under the program Micronic may issue 1,540,000 warrants for subscription to shares, of which a total of 1,155,000 may be awarded to the employees. In order to ensure Micronic's completion of its obligations to the holders of employee stock options, including payment of social security expenses arising on the benefit upon exercise of the employee stock options, the AGM also decided to approve the issuance of 1,540,000 warrants to Micronic Treasury AB for subscription to shares. Of these, 385,000 are intended to cover the cost of the social security expenses. As a consequence of this, the company's share capital may be increased by not more than SEK 1,540,000. All employees in the Parent Company are covered by the employee stock option program, but must be employed in order to exercise the options. The board has established four categories with different terms of grant.

The options have been issued in an amount of 40, 30 and 30 percent of the total number of options granted on the dates falling ten trading days after publication of the interim reports for the second, third and fourth quarters of 2007. The earliest opportunity to exercise the granted options was March 29, 2008. No options were exercised during 2008. The decrease in the total number of options outstanding is due to the fact that employees ended their employment, meaning that the options were forfeited.

The employee stock options were granted free of charge. The strike price is equal to 115 percent of the average market value on the ten trading days following publication of the respective interim reports, and for the three grant dates amounted to SEK 57, SEK 54 and SEK 34. Any options not yet issued may be granted to employees at a later date, for example in connection with hiring.

The original valuation of the employee stock options, as a basis for reporting the costs of the program, was carried out on the date of grant which was set at July 19, 2007. The valuation is based on assumptions that have affected the amount expensed as a cost. The costs of the employee stock option program will be recognized in reported profit through the first quarter of 2010. The following parameters have been used in the initial valuation, which has been performed according to the Black & Scholes model.

The initial valuation is fixed, with the exception of the assumption about the share of employees remaining on the respective exercise dates. This assumption may be changed on the basis of actual conditions. The total cost will also be changed, since social security expenses are calculated on fair market value and a new estimation of fair market value is carried out every quarter.

The cost excluding social security expenses is recognized as an administrative expense with a corresponding reduction directly in equity, while social security expenses are recognized as an administrative expense and an accrued expense in the balance sheet. Anticipated volatility corresponds to historical volatility during the six months prior to the AGM decision.

Of the total number of options granted, members of the executive management have been granted 320,000, of which 224,000 were granted in 2007.

Costs for the employee stock option program were charged to operating profit for 2008 in an amount of SEK 4.5 million and a total of SEK 9 million since the program's inception. The total costs on completion of the program in 2010 are estimated at approximately SEK 15 million.

	Grant period 1	Grant period 2	Grant period 3	Total
Maximum number of new shares to be issued	616,000	462,000	462,000	1,540,000
Maximum number of options available for grant to employees	462,000	346,500	346,500	1,155,000
Actual number of options granted	434,800	326,100	326,100	1,087,000
Value per option	11.96	13.26	14.53
Valuation date, so-called grant date	07-07-19	07-07-19	07-07-19
Share price on grant date	48.70	48.70	48.70
Strike price on grant date	54.00	54.00	54.00
Estimated average maturity	3 years	3.5 years	4 years
Interest (STIBOR plus interest on treasury bills, time-weighted)	4.17%	4.25%	4.34%
Anticipated volatility	35%	35%	35%
Dividends	-	-	-
Assumption about the share of employees remaining on the respective exercise dates	80%	80%	80%
Total estimated cost during term of the program (including social security expenses)	5,574	4,635	5,079
Actual strike prices	57.00	54.00	34.00
Number of options initially granted				1,087,000
Change during 2008				-145,850
Number of options outstanding at December 31, 2008				941,150
Share of initially granted number of options				87%
Valuation of options at December 31, 2008	0	0	0	0

MICRONIC 2008

NOTE 14. NET FINANCIAL ITEMS

	GROUP
	2008	2007
Interest income	13,320	14,161
Financial income	13,320	14,161
Interest expenses	11,377	10,910
Financial expenses	11,377	10,910
Net financial items	1,943	3,251

Interest expenses are expensed as incurred, while accrued expenses are calculated to obtain the total interest expense for the entire period. No interest expense has been capitalized as an asset item.

NOTE 15. RESULT FROM FINANCIAL INVESTMENTS

	PARENT COMPANY
	2008	2007
Interest income from group companies	955	1,060
Other interest income	13,243	14,093
Interest income and similar profit/loss items	14,198	15,153
Interest expenses	10,183	9,104
Interest expenses and similar profit/loss items	10,183	9,104
Result from financial investments	4,015	6,049

NOTE 16. LEASES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Equipment held under finance leases:
Opening balance, historical cost	78,460	78,460	-	-
The year's purchases	-	-	-	-
Historical cost of equipment held under finance leases	78,460	78,460	-	-
Opening balance, depreciation	-75,853	-64,942	-	-
The year's depreciation	-2,607	-10,911	-	-
Accumulated depreciation of equipment held under finance leases	-78,460	-75,853	-	-
Closing balance, residual value of equipment held under finance leases	-	2,607	-	-
The year's expensed lease charges	3,982	10,531	3,982	10,531

All finance leases pertaining to production equipment expired during the year. See also Note 26.

Since the end of 2008 the Group's operating leases refer to the property in Täby, which has been sold and is being leased back. In addition, there are a number of cars and rents for other premises.

In the Parent Company, all finance lease agreements are accounted for as operating leases.

On October 31, 2008, Micronic sold its property in Täby and at the same time signed an agreement with the buyer, D-Renting 6 AB, to lease back the property.

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Future minimum payments under operating leases and other lease agreements (nominal):
Within one year	19,445	5,889	11,654	431
Between one and five years	79,237	446	64,060	30
Later than five years	150,560	-	149,170	-
Future minimum payments under operating leases and other lease agreements (present value):
Within one year	19,200	5,889	11,409	431
Between one and five years	71,047	446	55,870	30
Later than five years	100,520	-	99,130	-

NOTE 17. TAXES

Group
Recognized in profit and loss	2008	2007
Current tax
The year's tax expense	-7,703	-6,063
	-7,703	-6,063
Deferred tax
Deferred tax on temporary differences	21,706	846
Deferred tax arising from the year's capitalized tax loss carryforwards	2,642	60,754
Deferred tax on capitalized development costs	-13,346	22,567
Deferred tax on intra-group profit carried in inventory	3,767	-694
Deferred tax arising from adjustments in previous year's capitalized loss carryforwards	-8	1,648
Deferred tax arising from changed corporate tax rate	-3,634	-
Deferred tax on derivatives arising from hedge accounting	613	726
Deferred tax on untaxed reserves	1,526	-
Other	-691	231
	12,575	86,078
Total reported tax in the Group	4,872	80,015

The lease object consists of the entire Täby Instrumentet 1 property, including all land and all buildings. The lease agreement runs from October 31, 2008, until December 31, 2023. During the lease period, the lease charges are based on the buyer's historical cost and are payable in a fixed portion and an interest-related portion, of which the latter is based on a reference interest rate, STIBOR 3 months, plus a margin. The interest-related portion is calculated for each quarter. As part of the property transaction, an option agreement has also been entered into between Danske Renting AB and Micronic through which Micronic has acquired an option to buy all shares in the company D-Renting 6 AB, which owns the property. The option can be exercised after 8 or 10 years.

Note 17, cont'd.

Reconciliation of effective tax rate	2008		2007
Profit before tax		-35,516		-287,556
Tax according to applicable tax rate in the Parent Company	28.0%	9,944	28.0%	80,516
Effect of different tax rates in foreign subsidiaries	3.0%	1,078	-0.0%	-100
Non-deductible/non-taxable items	-2.2%	-795	-0.9%	-2,527
Adjustment of prior year deferred tax	-0.0%	-8	0.6%	1,648
Effect of change corporate tax rate	-10.3%	-3,634	-	-
Other	-4.8%	-1,713	0.2%	477
Reported effective tax	13.72%	4,872	27.8%	80,015
Tax items recognized directly in equity			2008	2007
Value changes on derivatives used for hedging of foreign exchange risk in cash flow hedges			2,572	-1,571
Foreign exchange differences on foreign currency loans treated as net investments in foreign subsidiaries			-2,496	285
			76	-1,286
Recognized deferred tax assets and liabilities	2008		2007
---	---	---	---	---
	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Tangible assets	551	-51	586	-112
Intangible assets		-32,919		-21,701
Non-current receivables	-		1,611
Derivatives used as hedge instruments	2,258			-846
Trade receivables	354		143	-
Inventories	26,422		2,619	-36
Provisions	2,839		1,864	-
Untaxed reserves		-		-1,526
Accrued expenses	485		1,267
Other	1,965		2,358
Accumulated tax loss carryforwards	66,854		69,485
Deferred tax assets/liabilities	101,728	-32,970	79,933	-24,220
Setoff	-10,949	10,949	-3,317	3,317
Net deferred tax assets/liabilities	90,779	-22,021	76,616	-20,903
Changes in deferred tax	Opening balance January 1, 2008	Recognized in profit and loss	Recognized in equity	Closing balance December 31, 2008
---	---	---	---	---
Tangible assets	474	17		500
Intangible assets	-21,701	-11,218		-32,919
Derivatives used as hedge instruments	-846	532	2,572	2,258
Trade receivables	143	211		354
Inventories	2,583	23,838		26,422
Provisions	1,864	975		2,839
Untaxed reserves	-1,526	1,526		-
Accrued expenses	1,267	-781		485
Non-current receivables	1,611	885	-2,496	-
Other	2,358	-780		1,965
Tax loss carryforwards	69,485	-2,630		66,854
	55,713	12,575	76	68,758

Parent Company

Recognized in profit and loss	2008	2007
Deferred tax
Deferred tax on temporary differences	17,916	590
Deferred tax on the year's change in the capitalized tax value of loss carryforwards	2,785	60,754
Deferred tax arising from utilization of previously uncapitalized tax loss carryforwards	-8	1,648
Deferred tax arising from a changed corporate tax rate	-5,579	-
Other	-	-454
Total reported tax in the Parent Company	15,114	62,538

56
MICRONIC 2008

Note 17, cont'd.

Reconciliation of effective tax rate	2008	2007
Profit before tax	-80,625	-220,945
Tax according to applicable tax rate in Parent Company	28.0%
22,575	28.0%
61,865
Non-deductible/non-taxable items	-0.3%
-263	-0.7%
-1,452
Utilization of previously uncapitalized tax loss carryforwards	0.0%
-8	0.7%
1,648
Effect of changed corporate tax rate	-6.9%
-5,579	-
-
Other	-2.0%
-1,611	0.2%
477
Reported effective tax	18.75%
15,114	28.3%
62,538
Tax items recognized directly in equity	2008	2007
---	---	---
Foreign exchange differences on foreign currency loans treated as net investments in foreign operations	-2,497	285
	-2,497	285

Accumulated loss carryforwards in the Parent Company at December 31, 2008, amounted to SEK 254 million (247), of which the full amount is expected to be utilized against future taxable profits in the Parent Company.

	2008		2007
Reported deferred tax assets and liabilities	Deferred tax assets	Deferred tax liabilities	Deferred tax assets	Deferred tax liabilities
Tangible assets	551		586
Inventories	17,824		-
Non-current receivables	-		1,611
Accrued expenses	195		1,268
Accumulated tax loss carryforwards	66,854		69,342
	85,424	-	72,807	-
Changes in deferred tax	Opening balance January 1, 2008	Recognized in profit and loss	Recognized in equity	Closing balance December 31, 2008
---	---	---	---	---
Tangible assets	586	-35	-	551
Inventories	-	17,824	-	17,824
Non-current receivables	1,611	885	-2,496	-
Accrued expenses	1,268	-1,073	-	195
Tax loss carryforwards	69,342	-2,487	-	66,854
	72,807	15,114	-2,496	85,424

NOTE 18. INTANGIBLE ASSETS

Group	Business system		Development costs		License		Intangibles under construction		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Accumulated cost
Opening balance at January 1	20,003	15,947	505,161	471,020	17,084	17,084	-	2,846	542,248	506,897
Costs incurred during the year	-	1,210	71,885	34,141	-	-	-	-	71,885	35,351
Reclassification to business system	-	2,846	-	-	-	-	-	-2,846	-	-
Closing balance, accumulated cost at December 31	20,003	20,003	577,046	505,161	17,084	17,084	-	-	614,133	542,248
Accumulated amortization
Opening balance at January 1	-16,711	-15,254	-427,657	-312,918	-13,951	-10,534	-	-	-458,320	-338,706
The year's amortization	-1,656	-1,457	-24,221	-114,739	-3,132	-3,417	-	-	-29,009	-119,613
Closing balance, accumulated amortization at December 31	-18,367	-16,711	-451,878	-427,657	-17,084	-13,951	-	-	-487,329	-458,320
Closing balance, residual value at December 31	1,636	3,292	125,168	77,504	-	3,132	-	-	126,804	83,928

MICRONIC 2008

Note 18, cont'd.

PARENT COMPANY	Business system		License		Intangibles under construction		Total
	2008	2007	2008	2007	2008	2007	2008	2007
Accumulated cost
Opening balance at January 1	20,003	15,947	17,084	17,084	-	2,846	37,087	35,877
Costs incurred during the year	-	1,210	-	-	-	-	-	1,210
Reclassification to business system	-	2,846	-	-	-	-2,846	-	-
Closing balance, accumulated cost at December 31	20,003	20,003	17,084	17,084	-	-	37,087	37,087
Accumulated amortization
Opening balance at January 1	-16,711	-15,254	-13,952	-10,535	-	-	-30,663	-25,789
The year's amortization	-1,656	-1,457	-3,132	-3,417	-	-	-4,788	-4,874
Closing balance, accumulated amortization at December 31	-18,367	-16,711	-17,084	-13,952	-	-	-35,451	-30,663
Closing balance, residual value at December 31	1,636	3,292	-	3,132	-	-	1,636	6,425

The investment in a business system refers to costs incurred for the adaptation and implementation of a fully integrated business information system. Capitalized costs include both internally produced and externally acquired assets. Amortization was started when the system was deployed in the fourth quarter of 2002.

An individual assessment has been made of all ongoing research and development projects. Development costs that meet the criteria for capitalization are recognized in intangible assets. Capitalized costs consist of internally produced assets.

The externally acquired license refers to the right to exploit knowhow in maskless lithography applications, and relates to patent rights under the agreement with the Fraunhofer Institute for Microelectronic Circuits and System (IMS). Amortization was started at the end of 2003 and at year-end 2008 this right was fully amortized. Starting in 2003, license fees are also paid to Fraunhofer. See Note 33.

Information about depreciation/amortization by function is provided in Note 7.

NOTE 19. TANGIBLE ASSETS

Group	Buildings and land		Machinery		Equipment		Construction in progress		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Accumulated cost
Opening balance at January 1	133,960	133,960	28,607	28,353	398,463	417,985	1,147	5,543	562,177	585,841
Purchases	4,323	-	56	26	4,034	8,301	68	674	8,481	9,001
Reclassification to equipment	-	-	-	-	931	3,914	-931	-3,914	-	-
Reclassification from component inventory	-	-	-	-	-	41,632	-	-	-	41,632
Reclassification to products in progress	-	-	-	277	-36,800	-	-	-277	-36,800	-
Reclassification to buildings and land	-	-	-	-	-	-40,536	-	-879	-	-41,415
Historical cost of sold/scrapped equipment	-138,288	-	-	-49	-12,213	-33,064	-	-	-150,501	-33,113
Adjustment for classification of permanent equipment under IAS 16	-	-	-	-	7,090	-	-	-	7,090	-
Initial adjustment for transition to reporting under IAS 16	5	-	-	-	-	-	-	-	5	-
The year's foreign exchange differences	-	-	-	-	4,360	231	-	-	4,360	231
Closing balance, accumulated cost at December 31	-	133,960	28,663	28,607	365,865	398,463	284	1,147	394,812	562,177
Accumulated depreciation
Opening balance at January 1	-30,738	-26,588	-27,298	-26,881	-257,783	-226,322	-	-	-315,819	-279,791
Depreciation of reclassification to products in progress	-	-	-	-	17,886	12,992	-	-	17,886	12,992
Depreciation of sold/scrapped equipment	34,201	-	-	49	5,713	25,513	-	-	39,914	25,562
Adjustment for classification of permanent equipment under IAS 16	-	-	-	-	-7,090	-	-	-	-7,090	-
Initial adjustment for transition to reporting under IAS 16	-5	-	-	-	-	-	-	-	-5	-
The year's depreciation	-3,458	-4,150	-492	-466	-39,845	-69,966	-	-	-43,795	-74,582
Closing balance, accumulated amortization at December 31	-	-30,738	-27,790	-27,298	-281,119	-257,783	-	-	-308,909	-315,819

58
MICRONIC 2008

Note 19, cont'd.

Group	Buildings and land		Machinery		Equipment		Construction in progress		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Closing balance, residual value at December 31	–	103,222	873	1,309	84,747	140,680	284	1,147	85,904	246,359
of which, land	–	8,781							–	8,781
Tax assessment value
Buildings	–	80,497
Land	–	10,800
	–	91,297

Equipment has been reclassified to products in progress for a value of SEK 37 million (41). Correspondingly, equipment used primarily in R&D activities has been reclassified from products in progress to equipment in an amount of SEK – million (42).

Parent Company	Buildings and land		Machinery		Equipment		Construction in progress		Total
	2008	2007	2008	2007	2008	2007	2008	2007	2008	2007
Accumulated cost
Opening balance at January 1	132,726	132,726	28,607	28,353	290,172	310,359	1,147	5,543	452,652	476,981
Purchases	4,323	–	56	26	9,732	7,867	68	674	14,179	8,567
Reclassification to equipment	–	–	–	–	931	3,914	–931	–3,914	–	–
Reclassification from component inventory	–	–	–	–	–	41,632	–	–	–	41,632
Reclassification to machinery	–	–	–	277	–	–	–	–277	–	–
Reclassification to products in progress	–	–	–	–	–36,800	–40,536	–	–879	–36,800	–41,415
Historical cost of sold/scrapped equipment	–138,288	–	–	–49	–12,213	–33,064	–	–	–150,501	–33,113
Adjustment for classification of permanent equipment under IAS 16	–	–	–	–	7,090	–	–	–	7,090	–
Initial adjustment for transition to reporting under IAS 16	1,239	–	–	–	–	–	–	–	1,239	–
Closing balance, accumulated cost at December 31	–	132,726	28,663	28,607	258,912	290,172	284	1,147	287,859	452,652
Accumulated depreciation
Opening balance at January 1	–29,504	–25,354	–27,298	–26,881	–162,397	–144,620	–	–	–219,199	–196,855
Depreciation of reclassification to products in progress	–	–	–	–	17,886	12,992	–	–	17,886	12,992
Depreciation of sold/scrapped equipment	34,201	–	–	49	5,713	25,513	–	–	39,914	25,562
Adjustment for classification of permanent equipment under IAS 16	–	–	–	–	–7,090	–	–	–	–7,090	–
Initial adjustment for transition to reporting under IAS 16	–1,239	–	–	–	–	–	–	–	–1,239	–
The year's depreciation	–3,458	–4,150	–492	–466	–35,287	–56,282	–	–	–39,237	–60,898
Closing balance, accumulated depreciation at December 31	–	–29,504	–27,790	–27,298	–181,175	–162,397	–	–	–208,965	–219,199
Closing balance, residual value at December 31	–	103,222	873	1,309	77,737	127,775	284	1,147	78,894	233,453
of which, land	–	8,781							–	8,781
Tax assessment value
Buildings	–	80,497
Land	–	10,800
	–	91,297

Equipment has been reclassified to products in progress for a value of SEK 37 million (41). Equipment used primarily in R&D activities has been similarly reclassified from products in progress to equipment in an amount of SEK – million (42).

MICRONIC 2008

NOTE 20. PARTICIPATIONS IN GROUP COMPANIES

	PARENT COMPANY
	2008	2007
Opening balance, historical cost	27,084	27,084
Closing balance, accumulated cost	27,084	27,084
Opening balance, impairment	-2,407	-2,407
Closing balance, accumulated impairment	-2,407	-2,407
Closing balance, book value	24,677	24,677
	Corp. ID no.	Domicile
---	---	---
Micronic Treasury AB	556501-0989	Täby
Micronic Japan K.K.	607215	Tokyo
Micronic Laser Systems, Inc.	94-3344558	Wilmington
Micronic Laser Systems Far East Co. Ltd.	80271004	Taipei
Micronic Laser Systems Korea Co. Ltd.	134111-0136974	Anyang

24,677

NOTE 21. RECEIVABLES FROM GROUP COMPANIES

	PARENT COMPANY
	2008	2007
Opening balance, book value	26,209	27,227
Additions	7,298	-
Deductions	-	-1,018
Closing balance, book value	33,507	26,209

NOTE 22. OTHER NON-CURRENT RECEIVABLES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Opening balance, book value	5,309	5,200	80	80
Additions	34,966	418	32,000	-
Deductions	-2,224	-309	-2,200	-
Closing balance, book value	38,051	5,309	29,880	80

Additions in the Parent Company consist of a deposit for future lease charges on the property that was sold in 2008. The deposit is interest-bearing and will be released over the term of the lease, which runs for 15 years. Aside from the above, additions in the Group include deposits related to lease contracts in the Japanese subsidiary. All receivables are stated at nominal value.

NOTE 23. INVENTORIES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Components	81,083	106,973	81,083	106,973
Spare parts	90,539	104,021	42,842	54,500
Products in progress	138,080	122,614	138,080	122,614
	309,702	333,608	262,005	284,087

Equipment that is used primarily in R&D activities has been reclassified from products in progress to equipment in an amount of SEK - million (42).

In a similar manner, certain equipment has been reclassified from equipment to products in progress in an amount of SEK 37 million (41).

Inventory write-downs of SEK 67 million (14) have been charged to consolidated operating profit and refer to components used in products that are no longer marketed and actively sold.

NOTE 24. OTHER RECEIVABLES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
VAT receivable	4,333	4,270	4,333	4,270
Derivatives, non-hedge accounting	-	7,792	-	-
Advance payments to suppliers	736	2,869	736	2,869
Deposit for future lease charges	2,482	-	2,482	-
Other receivables	683	1,079	476	859
	8,234	16,010	8,027	7,998

NOTE 25. PREPAID EXPENSES AND ACCRUED INCOME

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Sales revenues	112,589	20,444	112,589	20,444
Cost of goods and services	268	3,666	268	3,666
Commission costs	1,976	2,177	1,976	2,177
Other	21,716	12,467	14,583	13,867
	136,549	38,754	129,416	40,154

NOTE 26. UNTAXED RESERVES/APPROPRIATIONS

	PARENT COMPANY
	2008	2007
Untaxed reserves
Opening balance, excess depreciation, machinery and equipment	5,451	5,451
The year's change	-5,451	-
Closing balance, excess depreciation	-	5,451
In the Parent Company, deferred tax liabilities on untaxed reserves are reported as a part of untaxed reserves. The closing balance of untaxed reserves includes a deferred tax liability of	-	1,526

MICRONIC 2008

Financial reports

NOTE 27. INTEREST-BEARING LIABILITIES/LIABILITIES TO CREDIT INSTITUTIONS

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Non-current interest-bearing liabilities
Bank loans	5,916	90,903	-	79,142
Other interest-bearing liabilities	142,162	89,998	142,162	89,998
Liabilities under finance leases	-	-	-	-
	148,078	180,901	142,162	169,140
Current interest-bearing liabilities
Current portion of bank loans	15,177	22,587	-	3,440
Other interest-bearing liabilities	-	33,157	-	33,157
Current portion of liabilities under finance leases	-	9,762	-	-
	15,177	65,506	-	36,597
Total interest-bearing liabilities	163,254	246,407	142,162	205,737
Bank loans fall due for payment as follows:
Within one year	15,177	22,587	-	3,440
Between one and five years	5,916	85,742	-	73,981
Later than five years	-	5,161	-	5,161
	21,093	113,490	-	82,582
Other interest-bearing liabilities
Within one year	-	33,157	-	33,157
Between one and five years	142,162	89,998	142,162	89,998
Later than five years	-	-	-	-
	142,162	123,155	142,162	123,155

Collateral for bank loans has been furnished in an amount of SEK – million (102) in the company's land and buildings and SEK – million (89) in floating charges.

	GROUP			GROUP
	2008			2007
Finance lease charges fall due as follows:	Minimum lease payments	Interest	Principal amount	Minimum lease payments	Interest	Principal amount
Within one year	-	-	-	9,862	-100	9,762
Between one and five years	-	-	-	-	-	-
Later than five years	-	-	-	-	-	-
				9,862	-100	9,762

Interest-bearing liabilities; contractual maturity structure, Group

	Nominal amount in original currency	Book value	Effective interest rate	Maturity date according to loan contract <1 year	1–5 years	Later than 5 years
Bank loans
JPY, fixed interest	245,260	21,092	1.74%	15,177	5,916	-
Other interest-bearing liabilities
EUR, fixed interest	13,000	142,162	4.28%	-	142,162	-
Total interest-bearing liabilities		163,254		15,177	148,078	-

Interest-bearing liabilities; contractual maturity structure, Parent Company

	Nominal amount in original currency	Book value	Effective interest rate	Maturity date according to loan contract <1 year	1–5 years	Later than 5 years
Liabilities to credit institutions
Total liabilities to credit institutions		-		-	-	-
Other interest-bearing liabilities
EUR, fixed interest	13,000	142,162	4.28%	-	142,162	-
Total interest-bearing liabilities		142,162		-	142,162	-

MICRONIC 2008

Note 27, cont'd.

Effect of change in interest rate on cash flow, Group

	Nominal amount in original currency	Book value	Effective interest rate	1% change in interest rate	Annual interest expense, actual	Annual interest expense with 1% increase
Bank loans
JPY, fixed interest	245,260	21,092	1.74%	2.74%	367	578
Other interest-bearing liabilities
EUR, fixed interest	13,000	142,162	4.28%	5.28%	6,085	7,506
Total interest-bearing liabilities		163,254			6,452	8,084

Effect of change in interest rate on cash flow, Parent Company

	Nominal amount in original currency	Book value	Effective interest rate	1% change in interest rate	Annual interest expense, actual	Annual interest expense with 1% increase
Other interest-bearing liabilities
EUR, fixed interest	13,000	142,162	4.28%	5.28%	6,085	7,506
Total interest-bearing liabilities		142,162			6,085	7,506

NOTE 28. NON-CURRENT PROVISIONS

	GROUP
	2008	2007
Employee benefits
Opening balance, book value	5,536	4,977
The year's provision	2,183	559
Closing balance, book value	7,719	5,536

In the Japanese subsidiary, provisions are made for long-term employee benefits. On certain conditions, a lump-sum payment is made to employees when their employment is terminated, either due to retirement or when the employee leaves the company for some other reason.

NOTE 29. OTHER LIABILITIES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Employee withholding tax	6,561	4,499	4,039	4,499
Derivatives, hedge accounting	9,688	-	-	-
Derivatives, non-hedge accounting	2,516	-	-	-
Other	3,598	3,426	7	8
	22,363	7,925	4,046	4,507

NOTE 30. ACCRUED EXPENSES AND DEFERRED INCOME

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Setup costs	3,909	3,986	3,909	3,986
Payroll and overhead costs	69,884	63,586	67,853	61,692
Commission costs	10,040	8,886	10,040	8,886
Other	44,774	42,824	32,337	30,675
	128,607	119,282	114,139	105,239

Accrued setup costs consist of the estimated remaining costs for setting up a system at a customer site. These costs are estimated on an individual basis for each system delivered and a provision is made in connection with revenue recognition. Costs for setup are easy to assess and are also small in relation to the value of the system as a whole. When setup is completed at the customer site, a warranty period begins and normally lasts for 12 months. See also Note 31. The Parent Company's payroll and overhead costs for 2008 include accrued restructuring charges.

NOTE 31. WARRANTY PROVISIONS

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Warranty provisions
Opening balance, book value	13,031	32,749	13,031	32,749
The year's provisions	20,014	14,760	20,014	14,760
Utilized during the year	-10,335	-26,732	-10,335	-26,732
Unutilized reversed amount	-3,858	-7,746	-3,858	-7,746
Closing balance, book value	18,852	13,031	18,852	13,031

Accrued warranty costs include the estimated remaining costs for warranty commitments. These costs are estimated on an individual basis for each system that is shipped to a customer. A provision for warranty commitments is made in connection with revenue recognition.

MICRONIC 2008

NOTE 32. PLEDGED ASSETS

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Collateral provided for liability items in the balance sheet
Liabilities to credit institutions
Property mortgages	-	102,000	-	102,000
Lien over equipment held under finance leases	-	2,606	-	-
Floating charges	89,000	89,000	89,000	89,000
	89,000	193,606	89,000	191,000

As collateral for the advance received on future royalties, Micronic has pledged a number of patents relating to SLM and datapath technology. As these are not recorded in the balance sheet, they have not been assigned any value in the table above.

NOTE 33. CONTINGENT LIABILITIES

	GROUP		PARENT COMPANY
	2008	2007	2008	2007
Future payment obligations to joint ventures	98,420	99,472	98,420	99,472
	98,420	99,472	98,420	99,472
of which, falling due: within one year	16,403	14,210	16,403	14,210
between one and five years	32,807	35,526	32,807	35,526
later than five years	49,210	49,736	49,210	49,736
	98,420	99,472	98,420	99,472

Under an agreement with the Fraunhofer Institute for Microelectronic Circuits and Systems (IMS) for future collaboration in development of the SLM technology, there are future payment obligations conditional on the fulfillment of a number of considerations.

NOTE 34. TRADE RECEIVABLES, IMPAIRMENT, AGE ANALYSIS AND OTHER INFORMATION

Group	2008		2007
	Gross	Impairment	Gross	Impairment
Trade receivables not yet due	170,678	-	250,188	-
Overdue trade receivables 0–30 days	33,622	-	1,950	-
Overdue trade receivables >30–90 days	1,815	168	369	-
Overdue trade receivables >90–180 days	1,332	477	312	-
Overdue trade receivables >180 days	636	546	1,085	609
Overdue trade receivables >360 days	-	-	111	111
Total	208,083	1,191	254,015	720

In 2008 an impairment loss of SEK 140,000 (419,000) was recognized in connection with a customer bankruptcy where there is no indication that the receivable can be recovered. Other financial assets refer to trade receivables with estimated good credit quality. Other than documentary credits and credit insurance in certain cases, no collateral is furnished.

NOTE 35. FINANCIAL ASSETS AND LIABILITIES

The following tables present the Group's financial assets and liabilities, stated at book and fair value and classified in the categories;

Derivatives, hedge accounting
Derivatives, non-hedge accounting
Loans and receivables
Other liabilities;

Fair value and carrying amount are recognized in the balance sheet according to the table below

The fair value of interest-bearing liabilities is based on expected future cash flows of principal and interest payments, discounted to the current market interest rate on the balance sheet date. For this calculation, the company uses the swap rate at December 31, 2008. The applied interest rates are based on the remaining maturity of the respective loans until the coming interest conversion date.

Group 2008	Derivatives, hedge accounting	Derivatives, non-hedge accounting	Loans and receivables	Other liabilities	Total carrying amount	Total fair value
Trade receivables			206,892		206,892	206,892
Other receivables
Cash and cash equivalents
SEK			162,591		162,591	162,591
USD			5,350		5,350	5,350
JPY			39,465		39,465	39,465
EUR			146,037		146,037	146,037
TWD			1,747		1,747	1,747
KRW			16,156		16,156	16,156
RMB			38		38	38
Total assets	-	-	578,276	-	578,276	578,276

MICRONIC 2008

Note 35, cont'd.

Group 2008	Derivatives, hedge accounting	Derivatives, non-hedge accounting	Loans and receivables	Other liabilities	Total carrying amount	Total fair value
Non-current interest-bearing liabilities
Non-current interest-bearing liabilities to credit institutions				5,916	5,916	5,916
Other non-current interest-bearing liabilities				142,162	142,162	142,162
Current interest-bearing liabilities
Liabilities to credit institutions				15,177	15,177	15,177
Trade payables				20,178	20,178	20,178
Other financial liabilities
Forward exchange contracts (cash flow hedges)	9,688	2,516
Other financial liabilities				807	807	807
Total liabilities	9,688	2,516	-	184,240	184,240	184,240
Recognized loss (change in value)	-	13,404	-	-	-	-
Group 2007	Derivatives, hedge accounting	Derivatives, non-hedge accounting	Loans and receivables	Other liabilities	Total carrying amount	Total fair value
Trade receivables			253,295		253,295	253,295
Other receivables
Forward exchange contracts
JPY		7,792			7,792	7,792
Cash and cash equivalents
SEK			231,013		231,013	231,013
USD			10,030		10,030	10,030
JPY			70,993		70,993	70,993
EUR			126,465		126,465	126,465
TWD			1,304		1,304	1,304
KRW			10,720		10,720	10,720
RMB			137		137	137
Total assets	-	7,792	703,957	-	711,749	711,749
Non-current interest-bearing liabilities
Non-current interest-bearing liabilities to credit institutions				90,903	90,903	90,762
Other non-current interest-bearing liabilities				89,998	89,998	89,998
Current interest-bearing liabilities
Liabilities to credit institutions				22,587	22,587	22,587
Other interest-bearing liabilities				33,157	33,157	33,157
Liabilities under finance leases				9,762	9,762	9,762
Trade payables				43,011	43,011	43,011
Other financial liabilities
Other financial liabilities				2,079	2,079	2,079
Total liabilities	-	-	-	291,497	291,497	291,356
Recognized loss (change in value)	-	710	-	-	-	-

The Group's holding of foreign exchange contracts at December 31, 2008, can be broken down into the following underlying amounts and maturities.

Outstanding foreign exchange contracts at December 31, 2008

	Currency	Amount, thousands	Maturity		Currency	Amount, thousands	Maturity
JPY, sold	JPY	1,100,000	Q1–09	USD, sold	USD	8,500	Q1–09
JPY, sold	JPY	1,700,000	Q2–09	USD, sold	USD	9,750	Q2–09
JPY, sold	JPY	30,000	Q3–09	USD, sold	USD	1,000	Q4–09
Total		2,830,000		Total		19,250

Risk management

A description of the Group's risks and risk management is provided in the report of the directors.

MICRONIC 2008

Note 35, cont'd.

Financial liabilities, maturity structure, Group

Group 2008
	Currency	Nominal amount in original currency	Total, SEK thousands	Within 1 month	1–3 months	3 months–1 year	1–5 years	5 years and later
Bank loans
Bank loans	JPY	245,260	21,092			15,177	5,916
Trade payables
Trade payables	SEK	13,290	13,290	11,851	1,439
Trade payables	EUR	75	818	531	286
Trade payables	JPY	38,950	3,350	3,350
Trade payables	USD	351	2,721	2,721
Other financial liabilities
Other interest-bearing liabilities	EUR	13,000	142,162				142,162
Other financial liabilities	JPY	9,381	807		807
Total			184,240	18,453	2,532	15,177	148,078	-

As in the previous year, the balance sheet item "cash and cash equivalents" consisted exclusively of bank balances at year-end 2008. Granted by unutilized bank overdraft facilities amount to SEK 25 million (25).

At the end of 2008, all property-related loans were redeemed following the sale of the property in Täby, outside Stockholm.

Financial liabilities, maturity structure, Group

Group 2007
	Currency	Nominal amount in original currency	Total, SEK thousands	Within 1 month	1–3 months	3 months–1 year	1–5 years	5 years and later
Bank loans
Bank loans	SEK	82,582	82,582		860	2,580	13,760	65,382
Bank loans	JPY	540,351	30,908		4,787	14,361	11,762
Liabilities under finance leases	SEK	9,762	9,762			9,762
Trade payables
Trade payables	SEK	18,622	18,622	16,225	2,397
Trade payables	EUR	1,278	12,108	11,852	256
Trade payables	JPY	109,003	6,235	4,355	1,880
Trade payables	USD	890	5,759	5,178		581
Trade payables	KRW	41,500	287	287
Other financial liabilities
Other interest-bearing liabilities	EUR	13,000	123,155			33,157	89,998
Other financial liabilities	JPY	36,341	2,079		2,079
Total			291,497	37,897	12,259	60,441	115,520	65,382

The bank loans in SEK refer to property loans. At the end of 2008, all property-related loans were redeemed following the sale of the property in Täby, outside Stockholm.

MICRONIC 2008

NOTE 36. SUBSEQUENT EVENTS

After the end of the financial year, no events have taken place in the Micronic Group which have had a significant financial impact on the company.

NOTE 37. CAPITAL MANAGEMENT

The board of Micronic has established a financial goal for the company to maintain a good capital structure that ensures financial stability and provides a solid foundation for ongoing development of business operations.

Micronic has not paid dividends on any occasion, and has instead reinvested the generated profits mainly to finance ongoing development activities and thereby create growth for the company.

Micronic defines capital as shareholders' equity according to the balance sheet, SEK 888,576 million (907,464), less unrealized gains/losses recognized directly in equity and share-based payments recognized directly in equity, SEK 882,436 million (898,972).

The Group's long-term goals are to achieve a gross margin of more than 50 per cent and an operating margin of more than 15 per cent and to maintain an equity/assets ratio of more than 60 percent.

Neither the Parent Company nor any of the subsidiaries is subject to any external capital requirements.

MICRONIC 2008

Proposed disposition of accumulated deficit

The board of directors proposes that the Parent Company's accumulated deficit of SEK 115,761,079 be carried forward to new account.

Approval and adoption

As stated below, the annual report and consolidated annual report were approved for publication on February 23, 2009. The profit and loss accounts and balance sheets of the Parent Company and the Group will be put before the Annual General meeting for adoption on April 1, 2009.

Statement of assurance

The board of directors and the CEO hereby give their assurance that the annual report has been prepared in accordance with Generally Accepted Accounting Standards in Sweden and that the consolidated financial statements have been prepared in accordance with Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of July 19, 2002, on the Application of International Accounting Standards. The annual report and the consolidated financial statements give a true and fair view of the financial position and performance of the Group and the Parent Company.

The report of the directors for the Group and the Parent Company gives a true and fair view of the business activities, financial position and results of operations of the Parent Company and the Group, and describes the significant risks and uncertainties to which the Parent Company and the Group companies are exposed.

Täby, 23 February 2009

| Christer Elmehagen
Chairman | Jörgen Centerman
Board member | Sigrun Hjelmquist
Board member |
| --- | --- | --- |
| Magnus Lindquist
Board member | Göran Malm
Board member | Lena Treschow Torell
Board member |
| | | Sven Löfquist
President & CEO |

Our audit report was submitted on February 23, 2009.

KPMG AB
Anders Malmeby
Authorized Public Accountant

Audit report¹

To the annual meeting of the shareholders of
Micronic Laser Systems AB (publ.)
Corporate identity number 556351-2374

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of directors and the managing director of Micronic Laser Systems AB (publ) for the year 2008. The board of directors and the managing director are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of international financial reporting standards IFRS as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. These 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 significant estimates made by the board of directors and the managing director 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 managing director. We also examined whether any board members or the managing director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

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

We recommend to the annual meeting of shareholders that the income statements and balance sheets of the Parent Company and the group be adopted, that the loss of the Parent Company be dealt with in accordance with the proposal in the statutory administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.

Stockholm. 23 February 2009

KPMG AB
Anders Malmeby
Authorized Public Accountant

¹) This is a translated version of the Audit Report relating to the statutory annual report which corresponds to pages 36-67 in the printed version of the annual report. Accordingly, this translated version of the Audit Report does not relate to the printed version of the annual report.

MICRONIC 2008

Micronic's history

1970

Micronic's history dates back to the 1970s when a group of researchers headed by Gerhard Westerberg began studies in the field of microlithography at the Royal Institute of Technology in Stockholm. Their aim was to develop equipment capable of writing photomasks for the semiconductor industry.

1984

Together with seven employees, Gerhard Westerberg formed a company to commercialize the research results and went on to launch the first laser pattern generator.

1989

Following the death of Gerhard Westerberg, the employees and CEO Nils Björk took over the company with the support of venture capital from Småföretagsfonden.

1993–1995

A weak semiconductor industry forced Micronic to seek other markets for its technology. The company developed a laser pattern generator that gave designers almost total freedom in design of shadow masks for TV displays (CRT).

1996

The LRS1100 became the industry standard for production of shadow masks. Around the same time, laptop computers began to appear on the market. As this market opened up, Micronic worked closely with its customers to continue development of the laser pattern generators that are now used to produce flat panel displays for both laptop and desktop computers.

1999

Micronic reentered the semiconductor market with the launch of the first Omega6000 system. Parallel to this, Micronic found several other application areas and developed the MP80+ series. The company's unique SLM technology was introduced the same year.

2000

Micronic was listed on the Stockholm Stock Exchange and sales reached an all-time high of SEK 704 million.

2003

The highest order intake in the company's history – passing SEK 1 billion, driven by the display market. A new generation of laser pattern generators for TFT-LCDs was launched. Micronic expanded its product program and launched a metrology system for photomasks for display production. Fully subscribed rights issue.

2005

A sharp rise in shipments of the LRS15000 for production of display photomasks pushed sales to an all-time high of SEK 1,276 million. Micronic opens the Asia Technical and Applications Center (ATAC) in Japan. The Sigma7500 was launched.

2006

A subsidiary is established in South Korea. The FPS5100 pattern generator was introduced for volume production of photomasks for advanced electronic packaging of semiconductor chips.

2007

The Prevision pattern generator series was introduced for production of advanced display photomasks for generation 8 (G8) and 11 (G11) display manufacturing.

DISPLAY DEVELOPMENT 1993 – 2007

MICRONIC 2008

Technical glossary

Acousto-optics

A science and technology dealing with interactions between sound waves and light waves passing through a solid material, such as a *crystal. Sound waves can be used to deflect, modulate, or focus light waves.

AOD, Acousto-Optic Deflector

A component in Micronic's laser pattern generators that is used to scan a laser beam over a range of angles, or to control the output angle of a laser beam.

CAD data

CAD (Computer Aided Design) data describing the pattern to be written in Micronic's pattern generators. The data is created using software for the design of electronic circuits. Three common data formats created with CAD software are DXF, Gerber and GDS II.

CCD, CMOS

CCD (Charge Coupled Device) and CMOS (Complementary Metal Oxide Semiconductor) are two image sensor technologies used in devices such as digital cameras and camera phones. An image sensor is a device that converts a visual image into an electric signal. CMOS is also the standard technology used in semiconductor chips.

DUV

Deep Ultra Violet. Light with a very short wavelength. In Micronic's case, this refers to the 248 nm wavelength of the laser in the Sigma system.

Electronic packaging

The manufacturing step that packages a semiconductor chip so that it is protected and can be connected to other electronic components in electronic equipment.

HDTV

High Definition TV, a TV standard with considerably improved picture quality. There are two versions, with 720 or 1,080 lines of resolution in the vertical direction, compared to standard TV with 576 (PAL, SECAM) or 484 (NTSC) lines of resolution. To use HDTV, both the TV programming and TV set must support the format.

LCD

Liquid Crystal Display, a display technology based on electrically active matrix of liquid crystal material. LCD technology is used in the most common type of flat panel displays. There are two main types of LCD; passive (PM-LCD or TN/STN LCD) and active (TFT-LCD).

MEMS

Micro-Electro-Mechanical Systems. The integration of micromechanical elements on the same silicon substrate. MEMS are most commonly manufactured in semiconductor processes with extra steps to form the mechanical and electromechanical devices. Micronic's SLM with one million individually tiltable mirrors is an example of a MEMS.

Micron, µm

One millionth of a meter (10⁻⁶ m), or one thousandth of a millimeter.

Mura

A Japanese word that is used to describe irregularities or systematic defects in display panels. Although the defects are often so small that measurement is difficult or impractical, they are visible to the human eye.

Nanometer, nm

One billionth of a meter (10⁻⁶ m), or one millionth of a millimeter.

OLED

OLED (Organic Light-Emitting Diode) is a flat panel display technology that is made by placing a series of thin organic polymer films between two conductors. When electric current is applied to an OLED cell, the resulting attraction between positively and negatively charged particles creates electro-luminescent in the emissive layer.

Phase Shift Mask

(PSM). Normal photomasks are binary; light is either blocked or transmitted. The smallest structures on today's most advanced semiconductor chips are so small that they cannot be manufactured by exposing a normal photomask with the shortest available light wavelength. Unlike a normal photomask, a phase shift mask also has areas that transmit 180-degree phase shifted light. The combination of light with opposite phases results in increased contrast and allows resolution of the smallest features on the chip.

Photomask

A photomask can be described as a photo negative. The image on the negative is written with Micronic's pattern generator and then transferred to the customer's end product via a lithographic process. The photomask consists of a transparent substrate of glass or quartz that is covered with a thin layer of chrome and a film of photoresist, a light sensitive material that can be developed and washed away once it has been exposed. After writing, the photoresist is developed and the pattern is transferred to the chrome layer by etching.

Plasma Display Panel (PDP)

A type of flat panel display that can be manufactured very large (30–80 inches diagonally) and relatively thin (approx. 100 mm).

Semiconductor chip/component

An electronic component containing more than one circuit element on the same silicon chip, such as memories, processors and amplifiers.

SLM

Spatial Light Modulator; an electro optical device that uses an array of individually controlled micro mirrors on a silicon chip.

Technology node

A generation of semiconductor manufacturing. The nodes are named based on the smallest feature or minimum spacing between features, for example 130 nm, 90 nm, and 65 nm. The later the generation, the smaller and faster the transistors and the more that can be placed on a single chip.

TFT-LCD

A TFT-LCD is an active LCD providing better image quality and faster response than a passive LCD. The standard technology for flat panel computer monitors, laptops and LCD-TVs. TFT-LCD is increasingly common in mobile phones. The active LCDs have a Thin Film Transistor (TFT) in each pixel.

Uptime

The time during when a system can be utilized for production.

Adjusted operating margin

Operating profit adjusted for capitalized development costs and amortization of previously capitalized development costs as a percentage of net sales.

Capital employed

Total assets reduced by non interest-bearing liabilities and deferred tax.

Capital turnover rate

Net sales divided by average capital employed.

Cash flow after investing activities before financing

Cash flow from operating activities and from changes in working capital less investments.

Cash flow from investing activities

Net capital investments in buildings, machinery and equipment as well as capitalized development costs and financial assets.

Cash flow from operating activities

Profit after financial items adjusted for non-cash items, income tax paid and changes in working capital.

Cash flow per share

Cash flow from operating activities divided by the average number of shares.

Dilution

A weighed average number of shares, affected by new issues of shares.

Earnings per share

Net profit divided by the average number of shares.

Equity per share

Equity divided by the average number of shares.

Equity/total assets

Equity as a percentage of total assets.

Gross margin

Gross profit as a percentage of net sales.

Net debt

Interest-bearing liabilities less cash and cash equivalents.

Operating margin

Operating profit as a percentage of net sales.

P/E ratio per share

Share price at December 31 divided by earnings per share.

Profit margin

Profit after financial items as a percentage of net sales.

R&D expenditure

Expenditure for R&D activities that has affected cash flow.

R&D expenses

Costs attributable to research and development activities including costs of personnel engaged in R&D work and amortization of previously capitalized development costs.

Return on capital employed

Profit after financial items plus financial expenses as a percentage of average capital employed.

Return on equity

Net profit as a percentage of average equity.

Pushing the limits

MICRONIC LASER SYSTEMS AB (PUBL.)
Nytorpsvägen 9
Box 3141
SE-183 03 Täby, Sweden
Tel: +46 8 638 52 00
Fax: +46 8 638 52 90
E-mail: [email protected]
www.micronic.se

MICRONIC LASER SYSTEMS
R&D GOTHENBURG
Mölndalsvägen 91
SE-412 63 Gothenburg, Sweden
Tel: +46 8 638 52 00
Fax: +46 8 546 258 32

MICRONIC LASER SYSTEMS INC.
1922 Zanker Road
San Jose, CA 95112, USA
Tel: +1 408 392 2260
Fax: +1 408 392 2261

MICRONIC JAPAN K.K.
Mitsugi-Kotobukicho Bldg.
1-1-3 Kotobuki-cho, Fuchu-shi
Tokyo 183-0056, Japan
Tel: +81 42 354 1320
Fax: +81 42 354 1321

MICRONIC LASER SYSTEMS KOREA CO., LTD.

9, Dong-A Plaza, 1608-4

Guanyang-Dong, Dongan-Gu
Anyang-si Gyeonggi-Do
South Korea (430-060)
Tel: +82 31 387 5111
Fax: +82 31 388 0087

MICRONIC LASER SYSTEMS
FAR EAST CO., LTD.
2nd Floor, #18 Pu-Ding Road,
Der-An Building, Hsin-Chu, 300, Taiwan, R.O.C.
Tel: +886 3 564 6656
Fax: +886 3 564 6664

MICRONIC LASER SYSTEMS AB
SHANGHAI REPRESENTATIVE OFFICE
39th Floor, Sino Life Tower
707 Zhang Yang Road, Pudong
Shanghai 200120, China
Tel: +86 215 835 8383
Fax: +86 215 835 8181

Micronic's symbol is a stylized image of a laser beam writing a complex pattern with extreme precision.

MICRONIC LASER SYSTEMS

AI assistant

Mycronic — Annual Report 2008

2946_10-k_2020-07-23_7b925433-2ea1-4c9a-b206-3983fcc8dabe.pdf

Micronic

Contents

FINANCIAL REPORTS

FINANCIAL CALENDAR

NOTICE OF AGM

RIGHT TO PARTICIPATE

REGISTRATION

NOMINEE SHARES

NOTICE TO ATTEND

FINANCIAL INFORMATION

Micronic in brief

MICROLITOGRAPHY IS THE LINK BETWEEN DESIGN AND MASS PRODUCTION

MICRONIC'S BUSINESS CONCEPT

MICRONIC'S ROLE

CUSTOMERS

MICRONIC IN EVERYDAY LIFE

MICRONIC'S MARKET POSITION

AFTER MARKET

Highlights of 2008

Comments by the CEO

RESULTS FOR 2008

DISPLAY MARKET

SEMICONDUCTOR MARKET

ELECTRONIC PACKAGING

AFTER MARKET – INCREASED PROFITABILITY

IMPROVED PERFORMANCE MANAGEMENT

THE FUTURE

The Micronic share

SHARE PRICE TREND IN 2008

TRADING AND LIQUIDITY

OWNERSHIP STRUCTURE

DIVIDEND POLICY

EMPLOYEE STOCK OPTION PROGRAM

SHARE DATA

MICRONIC'S TEN LARGEST SHAREHOLDERS AT DEC. 31, 2008

OWNERSHIP STRUCTURE AT DEC. 31, 2008

ANALYSTS THAT CONTINUOUSLY MONITOR MICRONIC

Micronic's markets

Display market

FLAT PANEL DISPLAY PRODUCTION TECHNOLOGIES

MARKET DRIVERS

THE MARKET FOR DISPLAY MANUFACTURING EQUIPMENT

MICRONIC IN THE DISPLAY MARKET

MARKET OUTLOOK

Semiconductor market

PHOTOMASK MARKET

MICRONIC IN THE SEMICONDUCTOR MARKET

MARKET OUTLOOK

The market for electronic packaging

EQUIPMENT MARKET FOR ELECTRONIC PACKAGING

MICRONIC IN THE MARKET FOR ELECTRONIC PACKAGING

Micronic's long-term strategic model

BUSINESS PLANNING PROCESS

CUSTOMERS

OPERATIONS

PRODUCTS

EMPLOYEES

FINANCES

MICRONIC'S VALUES

PROCESS FOR NEW BUSINESS OPPORTUNITIES

Micronic's values

PUSHING THE LIMITS

CAPTURING THE HEART OF THE CUSTOMER

TEAMWORK AND CLARITY

RESPECTFUL INTERACTION

Micronic's strategic model

LEAN THINKING PRINCIPLES

Micronic's operations and products

MARKET AND SALES

CUSTOMER-DRIVEN PRODUCT DEVELOPMENT

Best practice

Mats Ekberg

Magnus Martinsson

Johan Colling

Nina Skanse

PRODUCTION OF COMPLEX SYSTEMS IN SMALL VOLUMES WITH HIGH QUALITY

Patents and licensing

Mycronic Annual Report 2008