NOTE — Annual Report 2009

Mar 31, 2010

NOTE Annual Report 2009

Contents

Introduction

This is NOTE	1
The year in brief	2
CEO's statement	4

Operations

Vision, business concept and goals	6
Business model	7
Market and competitors	10
What they are saying about NOTE	12
Risk management	13
Quality, environment and ethics	14
Human resources	16
Organisation and group management	18
Board of Directors and Auditors	20
Five-year summary	22
Financial definitions	23
The NOTE share
Share data and shareholders	24
Corporate governance
Corporate Governance Report	26

Addresses 64

Shareholder information

Annual General Meeting

The AGM (Annual General Meeting) will be held at 11 a.m. on Tuesday, 27 April at Spårvagnshallarna, Birger Jarlsgatan 57A, Stockholm, Sweden. Information on the notification procedure for the Meeting will be uploaded to the website www.note.eu coincident with the invitation to the Meeting by no later than four weeks prior to the Meeting.

Notification

Shareholders intending to participate in the AGM must be recorded in the share register maintained by Euroclear Sweden AB by

21 April, and notify NOTE of their intention to participate by no later than 4 p.m. on 21 April.

Business

The agenda and business of the AGM will be stated in a notice in the daily press and will be available on NOTE's website. Documentation is also available from the company coincident with notification of intention to participate at the Meeting.

Dividend

The Board of Directors is proposing to the AGM that no dividend is paid for the financial year 2009.

Nomination Committee

The Nomination Committee has the following members: Kjell-Åke Andersson (representing own holdings)

Stefan Charette (representing Investment AB Öresund)

Bruce Grant (representing Garden Growth Capital)

Ulf Strömsten (representing Catella Fondförvaltning)

This is NOTE

NOTE offers electronics production services right through the value chain, from development and production to after-sales.

NOTE is one of the Nordic region's leaders in manufacturing and logistics services for electronics-based products. NOTE is active on the EMS (electronics manufacturing services) market and offers electronics production services right through the value chain, from development and production to after-sales. Its customers are mainly in the Nordic region and the UK.

NOTE has done methodical work to realign its operations—from a traditional role of a contract manufacturer

of electronics to a unique services provider on the EMS market.

NOTE's business model, Nearsourcing™, is based on a complete picture and consists of three components: Nearsourcing centres for prototyping and small-scale production in close collaboration with customers, services and tools for control right through product lifecycles and costefficient volume production in Europe and Asia.

Key facts

• Proprietary production capacity: Sweden, Norway, Finland, UK, Estonia, Lithuania and China.
• ems-alliance™: NOTE can offer additional cost-efficient production close to end-customers through its participation in the international ems-alliance network in Brazil, the Philippines, India and the US.
• Number of employees as of 31 December 2009: 1,100.
• Sales in 2009: SEK 1200 m.
• Share: Quoted on NASDAQ OMX Sweden's Nordic List (Small Cap/ Information Technology). At year-end 2009, the share price was SEK 21.30. Market capitalisation was SEK 205 m, divided between 9,624,200 shares.

Financial information

Calendar		Ordering financial information	Investor Relations contacts
Interim Report		Financial and other relevant information can be	Acting President and Chief Executive Officer
Jan–Mar 2010	27 April 2010	ordered from NOTE. Out of consideration for	Göran Jansson
Interim Report		the environment, the amount of printed matter	Tel: +46 (0)8 568 99006, +46 (0)70 698 8572
Jan–Jun 2010	16 July 2010	has been reduced and a subscription service is	e-mail: goran.jansson@note.eu
		readily available from NOTE's website.
Interim Report		Website: www.note.eu	Chief Financial Officer Henrik Nygren
Jan–Sep 2010	21 October 2010	Tel: +46 (0)8 568 99000	Tel: +46 (0)8 568 99003, +46 (0)70 977 0686
		Fax: +46 (0)8 568 99099	e-mail: henrik.nygren@note.eu
		Address: NOTE AB, Box 711,

182 17 Danderyd, Sweden

The year in brief

January–December

• Sales were SEK 1,200.1 (1,709.5) m.
• Operating profit/loss of SEK –90.8 (–3.8) m. Profit/loss includes non-recurring costs of SEK 63.7 (48.7) m.
• The operating margin was –7.6 (–0.2)%.
• Profit/loss after financial items was SEK –97.9 (–14.4) m.
• The profit/loss after tax was SEK –81.0 (–13.1) m, or SEK –8.42 (–1.36) per share.
• Cash flow after investments was SEK 23.9 (25.1) m, or SEK 2.48 (2.61) per share.

Events of the year

• Knut Pogost was appointed President and CEO of NOTE on 3 June 2009.
• Decision to discontinue production of a major product by NOTE's largest customer in the Telecom segment resulted in significant impairment losses and close-down costs in the third quarter. As a consequence, the operations at Skellefteå were divested at year-end.
• The acquisition of the IONOTE electronics plant was completed at year-end 2009, which was previously operated as a joint venture with an Asian partner. In the year,

the operations of IONOTE were developed to satisfy customers' increasing needs for direct sales to the Chinese market.

Subsequent events

• On 24 January 2010, Göran Jansson, Deputy Chairman of the Board, was appointed Acting President and CEO of NOTE.
• As part of NOTE's continued structural transformation, an overhaul of the group's units has begun. NOTE will utilise its unique strengths and competence in the high mix/low volume market segment better. The objective is to take savings and rationalisation measures that

create a positive profit effect of at least SEK 50 m in annualised terms during 2010. As part of this package, NOTE will further concentrate its production units in Sweden and internationally.

• The estimated cost of this rationalisation package is some SEK 45 m, which will be charged to profits in the first quarter of 2010.
• At the Extraordinary General Meeting on 7 April 2010, the Board of Directors proposed that the Meeting resolve on a new share issue of SEK 87 m for current shareholders.

Financial summary of 2009	Full year	Q1	Q2	Q3	Q4
Sales, SEK m	1,200.1	329.1	312.1	267.4	291.5
Non-recurring costs	63.7	–	8.0	55.7	–
Operating profit/loss ex cluding non-recurring costs	–27.1	–8.6	–10.1	–5.7	–2.7

Sales, SEK m

CEO's statement

The financial crisis and severe recession have accelerated NOTE's structural transformation. A number of segments are now in focus to build confidence and create the prospects of growth and profitability.

Progress in 2009

When the financial crisis hit the world in autumn 2008, it fundamentally altered our circumstances. All sectors and customer segments were affected more or less simultaneously, and volumes on our then-current assignments quickly contracted. We also faced a structural challenge when our biggest customer in the Telecom segment decided to amend its product offerings. Overall, our sales fell by nearly 30% in 2009 year on year to SEK 1,200 (1,710) m.

Despite substantial cost savings, reduced sales meant that our profits were unsatisfactory. We posted a loss after financial items of SEK –98 m, of which SEK –64 m comprised restructuring and other non-recurring costs.

Reduced demand also presented a major challenge to our cash flow. Alongside our customers, we did a lot of work to balance our inventories. In the year, our inventories were down by 36%, making a significant contribution to us posting a positive cash flow of SEK 24 m in the year.

In the fourth quarter, demand remained some 30% lower than the previous year. As a result of the gradual impact of our cost savings, we neared break even, with a fourth-quarter operating profit/loss of SEK –2.7 m.

Events in the Telecom segment resulted in the production of our largest product in sales terms discontinuing. This loss of production resulted in the operations at Skellefteå, Sweden being divested at year-end.

Looking back

When I was elected as a Board member of NOTE in 2007, its strategy and plans were focused on realigning NOTE through a greater services content, geographical closeness to customers through more Nearsourcing centres and reducing cost levels for labour-intensive processes. We have increased our services content by more active participation in customers' development processes. Significant resources have been assigned to building a preferred parts database (NOTEfied), a PLM tool for superior documentation management, acquisitions of design competence and the purchasing organisation in Poland.

Our cost level has been reduced by relocating labour-intensive production to NOTE's acquired units in low-cost countries. At year-end 2009, some two-thirds of our employees were located in low-cost countries, compared to some one-third two years ago.

Realigning a group of multiple entities with differing backgrounds and cultures, while also accumulating a range of new competences, is far from easy. Unfortunately, the effort, expense and time for this process was underestimated, while parts of our organisation did not adopt the new ideas. And simultaneously, the economy dramatically deteriorated. These events resulted in two changes of CEO in close succession.

Current conditions

So how are things with NOTE? Let me summarise:

The starting-point is that the EMS sector is one of the world's toughest, and arguably, one of those most affected by globalisation. Meanwhile, the usage of electronics products, which traditionally were mechanical, or in any case not interconnected in networks, is increasing. These products feature relatively short production runs and long lifecycles, and it is here that NOTE makes a unique offering. We can help a lot of producers so that the electronics in their products is designed and produced with high quality and cost-efficiency. We can offer assistance on efficient prototyping and producing components at the right cost, while we also have production capacity close to the customer—or at one of our foreign units.

NOTE has competent and committed people, which creates good prospects for success. However, we need to get better at pulling in the same direction and reducing uncertainties internally.

Our realignment has been costly, but despite challenging economic conditions, NOTE has been able to produce healthy cash flow.

At year-end 2009, NOTE had an equity to assets ratio of just under 30%, which is respectable considering that we have a high share of current assets.

Clarity and focus are the foundation of future growth.

This is what we'll do

In late-January 2010, I accepted the challenge as Acting CEO to re-engender confidence, through necessary structural measures to reduce our 'idling costs' and improve our utilisation of the organisation's strengths.

Although demand stabilised in autumn 2009, there are few signs of any quick economic recovery. Accordingly, my mission is focused primarily on the following segments:

Increasing volumes—continued focus on future sales growth in the Nordic region. We will take a higher share of our market segments of high mix/low volume, where we offer unique advantages. We will also be sharpening our focus on smaller and medium-sized accounts in this region. We have also observed that nearly half our Nordic customers have global operations. To grow, our customers must be able to offer their products on growth markets. This driver means that an increasing number of our customers need to relocate their production to Asia. Accordingly, one big challenge will be to follow our customers and offer services with the same high quality as we deliver in Europe.

Our now wholly owned operation in China is fully ready to meet the needs of European customers that want to take the step into Asia.

• Cost savings—we will be intensifying NOTE's structural transformation. We need to increase the group's capacity utilisation. Operations that are not profitable will be closed down. We will be focusing all our volume production on one plant at Pärnu, Estonia and one in Tangxia, China. In Sweden, we will be merging our units into one company with shared functions such as sales and accounting. The number of production units will be reduced to four.
• Greater clarity—communication and decision processes will be improved by securing them clearly in our organisation and through effective monitoring. Roles and processes will be more consistent, focusing on customer satisfaction and profitability.
• Quality enhancements—we've already made a lot of progress in our vital quality work. We are now setting the standard higher, and our ambition is to be the best in our market segment.

Strengthening our capital base—we will be sharpening our focus further on efforts that improve our utilisation of working capital. In this way, we will also reduce the risks of our business. The new share issue we have announced is another measure to improve our capital structure and prospects for growth.

Summary

The goal is for NOTE to grow and that growth will be with high efficiency and profitability. Major challenges still lie ahead of us, but I am convinced that the NOTE of tomorrow has good prospects of building lasting values for customers and shareholders.

Göran Jansson

Deputy Chairman in 2009 and Acting President and Chief Executive Officer from January 2010.

Vision, business concept and goals

Vision

NOTE—the relevant EMS partner.

Business concept

NOTE is a local business partner delivering innovative solutions for the global manufacture of electronicsbased products in the high mix/low volume segment.

Business goals

NOTE will be the sector's best collaboration partner with its high level of competence, competitive total cost of ownership and professionalism. To make the market's most competitive offering, NOTE shall possess specialist NPI competence and constantly focus on enhancing the customer's competitiveness. NOTE shall be an attractive employer, a good investment for shareholders and a professional customer for its suppliers.

Financial goals

Growth goal NOTE shall increase its market shares organically and by making acquisitions.

Profitability goal

NOTE shall grow with profitability. Its objective is a minimum return on operating capital of 20%. For the long term and over a business cycle, profitability shall also exceed the average of other medium-sized multinational EMS vendors.

Capital structure goal Minimum equity to assets ratio of 30%.

Dividend goal

Dividends shall be adapted to average profit levels over a business cycle, and for the long term, will be 30–50% of profit after tax. NOTE may also use dividends to modify its capital structure.

Business model

NOTE is a specialist services provider on the EMS market that delivers services right through product lifecycles, from design to after-sales, and from single components to box build products. Its business offering is based on satisfying customer needs optimally at every link in the value chain—and creating a strong complete package.

A strong complete offering

NOTE's offering helps customers to cut and control total cost of ownership. NOTE's quality focus with special strengths on products with long lifecycles mean that industry and defence sectors are priority customer segments.

NOTE's business model is based on a complete picture and consists of three components: Nearsourcing centres where work is done in close collaboration with customers, control through product lifecycles and costefficient production. NOTE's Lean production philosophy continuously rationalises all parts of operations.

NOTE likes to use the 'Made in NOTE' concept, where a product is covered by NOTE's complete picture, which stands for quality, stability and competence.

Nearsourcing centres

NOTE and its customers work in close partnership through the development phase in NOTE's Nearsourcing centres, while production is directed to the best cost alternative depending on product lifecycle, production volume and geographical final market. Geographical closeness and good collaboration conditions are highly significant when projects require unique competence and a substantial transfer of knowledge between the parties—Nearsourcing also means that product times to market are short, which reduces capital tied-up and adds a competitive edge in market terms.

Servicing and development services are provided in close partnership with customers at NOTE's Nearsourcing centres. The focus is on adapting production and practical applications and this is where design, development, PCB layouts and prototyping are done. Components and production is tested in practice, finished products and mechanical services are developed and fine-tuned. To achieve the best possible adaptation to the market, Nearsourcing services are

delivered at NOTE's units in northern Europe and Asia.

For customers, Nearsourcing provides high flexibility in introduction phases, before the product and market is ready for mass production. Meanwhile, NOTE's complete picture of the whole product lifecycle, combined with unique sourcing capacity, offer excellent prospects to control production and forthcoming component modifications for positive overall finances.

For NOTE, Nearsourcing is a cost-efficient way to introduce its customers to a cohesive production chain that factors in complete product lifecycles. By seeing the complete picture from the start, many costly mistakes and dead-ends are avoided.

Customers encounter the NPI— NOTE Product Introduction—concept at Nearsourcing centres. This is a complete business process involving technology, marketing and development for companies on the verge of launching a new product on the market. NOTE brings experience and knowledge of design, development, testing, production, logistics and after-sales.

NOTE also delivers after-sales services right through product lifecycles, such as logistics, distribution, repairs, spare parts management, re-design and maintenance.

Control through product lifecycles

In its role as business partner, NOTE offers a selection of tools and services to control costs and production through product lifecycles. This offers unique opportunities to create effective industrial processes and superior control of the arrangement of production, as well as the timing of product launches tailored to the market. The goal is to provide customers with the best possible overview, creating security and lower total cost of ownership.

NOTE gives its customers access to an extensive preferred parts database, NOTEfied (NOTE Fast Introduction Engineering Database), which is completely unique in terms of its breadth and scope. The database selects those components that are suitable and available on the market. NOTEfied can also be directly linked to customers' own design systems, which means product

developers and designers can select the right components from the start. This saves time and money, instead of being forced to exchange components later in the process.

NOTE's PLM (Product Lifecycle Management) tool provides customers with a product documentation platform right through product lifecycles. The PLM tool also provides support in sourcing processes, offering information on component's useful lives from the NOTEfied preferred parts database. It also supports effective version management and can be executed electronically worldwide. Internal and external stakeholders can access the system.

This combination of a preferred parts database and PLM tool is unique, and especially appreciated by customers with high documentation and traceability standards.

NOTE's value chain has four links, which constitute a comprehensive services offering in electronics production and sourcing.

Customers gain assistance on selected parts or can let NOTE deal with everything from development to after-sales services.

It enables effective and reliable version management with first-class control over products' constituent components.

Because NOTE has a holistic philosophy on industrial processes and lifecycles, box build production is becoming a more important component of its offering. This means that apart from electronics manufacture, NOTE also delivers mechanical engineering services such as cutting machining, plastic injection moulding, thin plate processing and die-casting. Electronics and mechanical engineering solutions are developed in parallel in close partnership with the customer and different NOTE units.

Cost of materials represents the majority of the total cost of a finished product. Accordingly, component sourcing is highly significant to NOTE's business for electronics and mechanical engineering. To optimise the group's sourcing, it is coordinated in NOTE Components, which has sourcing functions in northern Europe, central Europe and Asia. New sourcing channels are continuously evaluated, and by searching for alternative

components, screening new vendors and negotiating with existing suppliers, cost of materials is continuously reduced. Some sourcing is also coordinated through the ems-alliance, which increases sourcing volumes and reduces prices.

Cost-efficient production

In collaboration with the customer, production is located where optimal depending on the complete picture of factors like costs, product lifecycles, volumes and geographical final market. Production is highly integrated with NOTE's other services, from development to product updates.

NOTE's production is especially well suited to products with long lifecycles and high rates of change through their lifecycles.

NOTE offers its customers production at its units in the Nordic region, the Baltics, UK, Poland and China. Depending on market conditions, other cost conditions or initial development plans, production can be transferred seamlessly and on a quality-assured basis from one unit to another. Generally in recent years, production has migrated eastward because this is where growth is highest. For box build products, NOTE develops electronics and mechanical engineering solutions in parallel in close partnership with the customer at the relevant NOTE units. Once a box build product is complete, final assembly and packaging is at that NOTE unit with the closest match to the customer's needs for volumes, costing and geographical location in relation to its final market.

Some customers want global suppliers that can deal with smaller or larger production volumes locally and globally. To satisfy this need, in 2001, NOTE initiated a partnership involving independent electronics producers across four continents. This multinational network is called the ems-alliance and supplements NOTE's own production capacity. As a result, NOTE can satisfy its customers' needs to manufacture products close to most final markets, while production is also cost-efficient. This network now has members in Brazil, the Philippines, India, Sweden and the US.

Market and competitors

NOTE is active in the EMS (electronics manufacturing services) market. NOTE's offering has a broader services content than the average EMS vendor, and its customer relationships often feature a significant element of partnership. Its operations are in northern Europe and China.

The market in 2009

After the heavy downturn triggered by the financial crisis in autumn 2008, the market continued to weaken in spring 2009. The market levelled off through the summer and autumn, and in the last four months of the year, activity was stable but low. There were no signs that the situation would exacerbate further, nor any substantial signals of a speedy recovery.

The sharp economic slowdown and the fact that a number of component suppliers cut output rates caused shortages of certain components. This had implications such as delivery delays and exceptional price increases on isolated items.

Market trends, drivers and outlook

The EMS market has been in profound transformation over recent years. The prime drivers have been price pressure on components, the search for cheap labour, a faster production chain from initial idea to sales and robust economic progress in growth regions with the emergence of new final markets as a result. One driver winning ground recently, notably among industrial customers, is a greater willingness to find climate positive alternatives. This basically affects all links in the value chain, from different choices in the development phase to transportation. One consequence is that increasingly, production is close to final markets.

In Asia, and China especially, high growth spurred on domestic consumption. In turn, this is creating new demand for the final products previously manufactured for export to Europe and the US. These new opportunities have contributed to a still-faster rate of change on the EMS market, because an increasing number of global industrial corporations are now establishing a long-term presence in Asia. They are building functions right through the value chain, from development and production to sales and after-sales services. This progress is expected to sustain for the coming years. Of the major economies, India is expected to undergo similar progress as China, with more international investments.

In Europe, the EMS market is assessed to be flat or slowly rising, which means that the primary drivers will remain the pursuit of costs and rationalisation. In geographical terms, this means there is still scope for production transfers from west to east.

Sector commentator iSuppli estimates that the whole EMS market will grow by some 7% annually over the coming years.

Outsourcing

NOTE judges that the share of outsourced production will continue to increase regardless of economic conditions. More and more companies need and want to focus on core business. Accordingly, they want a strong, competent partner that is an expert in product development, component management, box build, industrialisation and after-sales services, for example. By coming to NOTE, customers get access to all this competence, while sharing the costs with other customers. Overall, this reduces capital tied-up and more resources can be used for sales and development, for example.

Customer base structure and regional allocation

NOTE offers specialist services and tools right through the chain from development and product control through lifecycles to cost-efficient production and after-sales services close to customers' final markets. They are especially well suited for customers with products that have long lifecycles, high rates of change in this time and that need first-class version management.

NOTE's customer base is split equally between global corporations active on the world market and local players, whose primary sales base is in northern Europe.

NOTE judges that about a quarter of its global customers will need production in China in the coming years. NOTE started up its operation in China a few years ago, and is very well prepared to cope with production transfers from Europe as

Global EMS sales by technology in 2007, USD m

Source: iSuppli

well as starting up new production. For smaller and medium-sized locally based customers, NOTE has put a big emphasis on creating flexible concepts that suit companies with growth ambitions and that want to start up on new markets, primarily in Europe. This customer category needs services close to development, value-for-money components and opportunities to locate costefficient production at a reasonable distance from their final market.

NOTE's offering is also well suited to larger pan-Nordic players that have high traceability and documentation standards.

Customers signing major contracts in the year include Kongsberg Defence & Aerospace, Radi Medical Systems, Radiocrafts AS and Telespor AS.

Overall, NOTE is well positioned to address the needs of customers that want to grow in Europe and Asia.

Competitors

Some of NOTE's major competitors active on the Nordic market are Partnertech, Kitron and Enics.

Introduction Operations The NOTE share Corporate governance Formal Annual Accounts

What they are saying about NOTE

A selection of media quotes on NOTE in 2009:

Atlas Copco transfers production profitably

"We wanted to cut total cost of ownership while still maintaining the same quality. Apart from actual production, we also wanted to cut our costs of transportation and create an environmental gain. If we transferred electromagnetic production to China, we would also get more flexibility and closeness to production, and not least, to our final market. In reaching our decision, it was vital that NOTE had a complete and functional production unit. Their transfer process was thoroughly planned, tried and tested in practice and quality-assured. They satisfied our standards point by point. I regard the Chinese as very thorough and used to working with quality assurance."

Peter Bódizs, Strategic Global Purchasing Manager for Atlas Copco Surface Drilling Equipment's electrical range commenting on transferring production to NOTE's unit in China. Elektronik i Norden, 9 October 2009.

Radi Medical Systems selects NOTE for its wireless blood pressure gauge

"Our biggest priority was finding a supplier that satisfies all our quality standards. NOTE has the overall technology to manage our products, and also has good working methods that really give us the attention we need to maintain high quality. The possibility of volume production in China is also a plus."

Jonny Munther, Technical Purchasing Manager, Radi Medical part of the St. Jude Medical group, on the selection of NOTE as a supplier. Elektronik i Norden, 5 October.

Radiocrafts of Norway designs and produces sophisticated wireless communication modules

"The reasons we chose NOTE as our supplier were closeness and flexibility. The first phases of this work will be in close collaboration with us, which is time and cost-efficient. We will then locate volume production where it is best for us."

Peder Martin Evjen, President of Radiocrafts, commenting on what decided their selection of NOTE as a supplier. evertiq, 23 June.

Tour & Andersson sells advanced products worldwide that balance flows in heating and cooling systems

"It was important for us to find a vendor that maintains high quality, stays in control, has an impact at the supplier level and has the production capacity for higher volumes in regions where costs favour us. NOTE is a partner that has world-class international and local production—simply put, it has the whole package."

Joakim Merstrand, Strategic Buyer at Tour & Andersson, reviews the company's selection criteria when choosing a production partner. evertiq, 24 mars.

Delivering with high quality

NOTE conducts regular customer satisfaction surveys, whose results are linked directly to ongoing improvement work. Here are a few results:

• Production. 87.3% of NOTE's customers are satisfied or very satisfied with the quality of their products.
• Service. 83.4% of NOTE's customers are satisfied or very satisfied with their quality of service.
• The whole picture. 89.5% of NOTE's customers are satisfied or very satisfied with NOTE in an overall perspective.

Risk management

Operational risks

Risk	Exposure and management
Customers The risk that a customer leaves NOTE or cannot fulfil its obligations.	NOTE has over 300 active accounts, the 15 largest in sales terms represent some 50% of its sales. In most cases, NOTE manufactures a range of products for each customer. Usually, customers choose to place all their production of one product with the same supplier, so they can limit material commitments and risks. NOTE's production volumes are closely linked to which products, and where in product lifecycles, the customer's products lie. Accordingly, sales variations can be significant for individual customers. The demand for NOTE's services offering varies depending on economic conditions. In recessions, there is usually a high focus on cost-cutting, while in upturns, there is high demand for services that help reduce time to market.
Environmental risks The risk that operations cause damage to the environ ment and costs for complying with new more stringent environmental directives.	Unlike the rest of heavy industry, NOTE's business has a fairly limited environmental impact. To comply with ap plicable environmental legislation, NOTE has transferred to lead-free production just like the rest of the electronics industry.
Liability Risks in addition to the above environmental risks where the group can be liable for payment due to commit ments in its business.	NOTE's role includes it being a collaboration partner to its customers, but not a product owner. Accordingly, NOTE's responsibility includes conducting production and component selection according to instructions agreed with the customer. Requirements for documentation are usually extensive and can be regarded as complex. Where possible, NOTE arranges insurance cover against damages caused by production faults.
Economic and seasonal variations	The EMS market is relatively young and usually considered fairly cyclical. Of the somewhat larger traditional EMS companies, there are few, if any, that have succeeded in maintaining good profitability through a business cycle. NOTE's forward-looking Nearsourcing initiative is intended to promote profitable sales growth in combination with low investment and overhead costs in high-cost countries.
Production downtime Downtime in production affecting deliveries to custom ers and causing extra costs.	Because NOTE conducts advanced manufacture of electronics, it is subject to high standards for efficient processes and state-of-the-art production equipment. The risk of production downtime is limited by production being of a similar nature across several of the group's units. Accordingly, NOTE can transfer production from one unit to another, limiting its risks for long-term production downtime. NOTE has insurance cover against damage caused by production downtime.
Competence The risk of not possessing sufficient competence in all parts of business.	NOTE's sophisticated activities require high technical and other competence across several segments. It conducts major initiatives to continuously develop the competence of its people.
IT IT-related disruptions can cause production downtime, loss of invoicing or reduced efficiency in administration and sales.	Considering the extensive collaboration between NOTE's Swedish and foreign units, NOTE is subject to extensive requirements for well-functioning IT systems. A long-term initiative on shared IT systems for the group's larger units was started in 2009.
Capacity risk The risk of not having sufficient capacity in plants.	After building the group's production capacity in low-cost countries, NOTE can be considered to have satisfactory production capacity.
Materials Price and supply of materials.	The pricing of and access to electronic components and other production materials vary significantly depending on market conditions. Within NOTE Components, the company has built a group-wide organisation to deal with sourcing matters effectively.
Inventories The risk of components and production materials not being consumed, and thus losing value.	NOTE has substantial inventories corresponding to some 15–20% of sales. Sourcing on its customers' behalf is normally formalised through agreements with customers. Considering the complexity of electronics production and demand, avoiding the incidence of obsolescence in inventories is challenging. Accordingly, NOTE collaborates closely with its customers to limit the risks in its inventories.

Financial risks

Risk Exposure and management

Currency

Currency risk means that a fluctuation in exchange rates can affect the group's profit, cash flow or balance sheet negatively.

Customer credit

The risk that a customer is unable to pay its debt to NOTE.

Financing

The risk that refinancing loans is more difficult or costly, and that accordingly, NOTE's ability to pay is negatively affected.

Against the background of an increasing share of value-added being generated in foreign units and the purchasing of electronic components and other production materials being largely in foreign currencies (EUR/USD), NOTE has extensive currency management. With the aim of limiting currency risks, NOTE trades in instruments including currency forwards and currency options.

NOTE's business model includes it serving as a long-term partner to its customers. Evaluations and creditworthiness checks are run on new and existing customers. Ongoing financial reporting includes close monitoring of outstanding accounts receivable—trade.

NOTE has a substantial need for external finance, primarily linked to the working capital of operations. Different sources of finance are continuously evaluated in close collaboration with NOTE's lenders. Considering the cyclicality of its operations, funding costs and NOTE's prospects of re-financing are closely linked to market conditions and NOTE's cash flow and earnings ability.

Quality, environment and ethics

Sustainability issues are integrated into NOTE's business operations and affect all units. Segments include quality issues, environmental impact, business ethics and human rights. Sustainability work is decentralised, with co-ordination using shared goals, guidelines and key indicators. Because NOTE has multiple business partners, it is vital that the company's ambitions are also reflected in the standards it applies to subcontractors.

The complete picture raises standards

Taking an integrated approach to different CSR (corporate social responsibility) issues is crucial to how effective overall results are. These matters involve everything from helping customers to select components with good environmental and quality performance from the start, to locating manufacture close to final markets, so that the adverse environmental impact of transportation is minimised. In tandem with its work on improving customers' impact on the environment and society, NOTE conducts its own activities to minimise the group's negative impact on its surroundings.

NOTE works on continuous improvements in close collaboration with customers.

Delivery precision

NOTE's delivery precision has improved in recent years—it was 90% in 2009. This can be considered high in the high mix/low volume segment, as corroborated by the customer satisfaction surveys NOTE regularly conducts.

Quality policy and working methods

NOTE creates competitiveness for its customers by delivering the right quality at the right time and at the right price. To achieve this, NOTE continuously develops and improves its services to always address the customer's standards and expectations. Improvement work is through a flexible organisation with the right competence. The organisation works towards shared and traceable goals, that can be quickly tailored to the customer's standards. For example, delivery precision and delivery quality is continuously measured for customers and suppliers.

NOTE utilises a portfolio of qualityassurance tools and methods whose origins lie in the quality systems of the automotive and pharmaceutical industries.

ISO 9000 is a series of international standards used to direct the focus of corporate quality management systems. 11 of NOTE's units have ISO 9001 certification. A complete list of the certification of its various units is at www.note.eu. Using its quality management system, NOTE can trace errors and continuously develop the company's methods and processes.

NOTE ensures its work is functioning through regular audits conducted by internal and external auditors. An external party verifies and certifies its management system.

Customer claims

In the first quarter of 2009, NOTE received 4,300 claims per million units. In the fourth quarter, the corresponding figure was 2,300, a 46% improvement in the year.

Environmental policy and working methods

NOTE will strive for long-term and sustainable development by producing the minimum possible environmental impact. NOTE shall comply with, or exceed, applicable environmental legislation, work on continuous improvement and maintain an updated environmental policy.

NOTE endeavours to achieve long-term sustainability and production with low environmental impact.

To reduce its environmental impact, NOTE's production units endeavour to achieve continuous improvements. These plants sort waste at source and measure components with an environmental impact such as electrical items and consumables. Other parts of operations also embed environmental considerations as a natural part of activities like purchasing, waste sorting and transportation, for example.

This work is decentralised, and the environmental policies and certification of individual units is stated at www.note.eu. Environmental work also follows international ISO guidelines. The main series in the environmental segment is ISO 14000, and eight of the group's units have ISO 14001 certification. NOTE's environmental management system is audited in the same way as its quality work, with the aid of internal and external inspectors. Certification is awarded by an external party.

NOTE—winner of the Municipality of Norrtälje's environmental award

The Municipality of Norrtälje cares for the environment and recognises those companies that help create a cleaner and more resource-efficient Municipality. When, in April 2009,

the Municipality presented its first environmental award, NOTE Norrtelje was recognised for its work in a series of environmental segments.

NOTE Norrtelje started methodical environmental work in 1996, and achieved ISO certification in 1997. For example, all waste is sorted at source, with nothing deposited in landfill. Electronic waste is sold, glass and recycled paper collected, corrugated board and other packaging is compacted to minimise the amount of waste transportation. This work features continuous rationalisation and improvement.

NOTE takes social responsibility.

Ethics

NOTE has undertaken to conduct responsible and sustainable operations. This also includes the company's social responsibility in all parts of the supply chain. Accordingly, NOTE has prepared a Code of Conduct that is mandatory for NOTE and its subcontractors.

The Code of Conduct is based on the UN's Global Compact Initiative and includes respect of human rights, freedom of association in trade unions, fair employment, safe working conditions, environmental consideration and rejection of all types of discrimination, child labour and corruption.

The complete Code of Conduct is at www.note.eu.

Human resources

2009 was a challenging year for many of NOTE's employees. The actions implemented to address the severe economic crisis were implemented with care for those affected.

Human resources	2009	2008
Average number of employees	977	1201
Number of women	470	604
Number of men	507	597
Attendance, %	96.4	95.7
Staff turnover, %	3.6	11.1

Progress in 2009

The financial crisis of autumn 2008 unleashed a situation of dramatically reduced order intake in all of NOTE's sectors. This resulted in NOTE gearing up the rate of structural changes that had been ongoing for several years, with production gradually transferring to low-cost countries. This work continued right through 2009, and is expected to continue in 2010.

To adapt costs to the new revenue levels, NOTE conducted a thorough overhaul of all the processes at its

Working environment

All NOTE's employees should be offered a working environment that:

• is safe and stimulating
• features trust in the individual
• builds on mutual respect
• complies with laws and ordinances in the segment

units. To reduce personnel expenses, a series of measures were taken which were highly significant to the group's staff.

The measures taken varied between countries depending on laws, cultures and social security systems.

Notices, temporary dismissals and agreements on reduced working-hours were introduced in several units. Agreements on flexible working-hours and temporary employment were used where appropriate. Several measures will also be applied going forward to create flexibility for variations in order flows and similar circumstances.

Diversity and equal opportunities

All NOTE's employees should feel that they are unique, of equal value and have the prospects to develop according to their circumstances. Diversity and equal opportunities are not merely internal matters but feature in all work and relationships with customers.

All employees of NOTE have a collective responsibility for diversity and equal opportunities issues becoming a natural part of operations.

A good working environment is fundamental for good results at work and a prerequisite for productivity, efficiency and the quality of operations. Work on the working environment is conducted locally at all NOTE units.

NOTE encourages:

• a high level of service that puts the customer in focus
• an atmosphere where everyone feels, and takes, responsibility
• an open climate that creates a sense of security
• an environment that is stimulating, and where all employees take responsibility for their development

Leadership

A high rate of change makes good leadership a necessity. NOTE's basic outlook on leadership is to delegate responsibility as far as possible, while simultaneously creating the right prospects for everyone to take greater responsibility.

Employees at year-end

Organisation and group management

NOTE is organised to create quality in all contexts so that customers get the right services and production alternatives, in the right place and at the right time.

Organisation

The NOTE group's parent company and management are located in Danderyd, near Stockholm, Sweden. The group is organised according to the company's strategy of a sharp focus on services close to development and effective production.

Local presence, global co-ordination

NOTE has a de-centralised organisational structure with each Nearsourcing centre being responsible for sales and deliveries to its customers. Nearsourcing centres are also responsible for the smooth functioning of interaction with other group functions, collaboration partners and

subcontractors. Similarly, there are dedicated functions responsible for delivering a strong offering in development and industrialisation phases.

NOTE's Nearsourcing centres and Industrial Plants collaborate closely with each other so they can deliver high quality and create profitable production that matches customers' needs.

Board of Directors and Auditors

Bruce Grant Chairman of the Board since 2007. Born in 1959. Education: ThD Cand. and B.Sc. (Econ.) NOTE holdings: 487,500 shares.

Other significant assignments: Chairman of the Board of Human Care and Robust. Board member of Stille and the Swedish-American Chamber of Commerce in New York.

Professional experience:

Former Board member and adviser on profitability improvements and more efficient capital structures for Kinnevik, Korsnäs, Metro, Transcom and Tele2 (Chairman).

Göran Jansson Deputy Chairman since 2008. Board member since 2007. Born in 1958. Education: B.Sc. (Econ.) NOTE holdings: 50,000 shares.

Other significant assignments: Acting President and CEO of NOTE. Chairman of the Board of Bankit, Nwise and Opax AS. Board member of Axis Communications, Human Care, Robust and Stille.

Professional experience: Former Acting CEO and CFO of Assa Abloy, also head of Sourcing and R&D.

Bo Andersson Board member since 2009. Born in 1955. Education: B.A., officer training, leadership program at Harvard University. NOTE holdings: 0 shares.

Other significant assignments: CEO and Chairman of the Board of OJSC GAZ.

Professional experience:

Member of GM's group management, Head of Production Planning, Logistics, Quality and Purchasing. Former member of group managements of Opel and Saab Automobile.

Håkan Gellerstedt

Board member since 2007. Born in 1947. Education: B.Sc. (Eng.) NOTE holdings: 4,000 shares.

Other significant assignments:

Management Consultant, CEO and proprietor of SARL MTL Consultants, France, Partner of Rotationer Ltd.

Professional experience:

Former management consultant at Indevo and Interpares, assignments including global production strategies, profitability enhancement packages, business and development strategies for Swedish and international companies.

Göran Gezelius

Board member since 2009. Born in 1950. Education: B.Sc. (Econ.) and B.Sc. (Eng.) NOTE holdings: 0 shares.

Other significant assignments: Chairman of the Board of Sekab. Board member of Alimak Hek Group, AMF Pension, Teknikföretagen and Tobii Technology.

Professional experience: CEO and President of Gunnebo, EVP of Atlas Copco and Business Area Manager

of Sandvik.

Per-Arne Sandström Board member since 2007. Born in 1947. Education: Senior high school technology graduate. NOTE holdings: 20,000 shares.

Other significant assignments: Chairman of the Board of Infocare and P-A Sandström Consult. Board member of Cellmax, Incentive and Saab.

Professional experience: Former Deputy Group Chief Executive and COO of Ericsson.

Göran Sigfridsson

Board member since 2009. Born in 1948. Education: B.Sc. (Eng.) NOTE holdings: 1,000 shares.

Other significant assignments:

Chairman of the Board of Svep Design Center. Board member of Borgestad Industries, HMS Networks and Regional Board of Southern Scania for the Southern Swedish Chamber of Commerce.

Professional experience: CEO and President of Beijer Electronics.

Employee representatives

Jimmy Almevind Board member since 2009. Born in 1977. Machine Operator. Representative, IF Metall. Main education: Senior high school graduate, electronics. NOTE holdings: 0 shares.

Christoffer Skogh Board member since 2009. Born in 1975. Account Manager. Representative, Unionen. Main education: Senior high school graduate, social sciences. NOTE holdings: 500 shares.

Andreas Ollén Deputy since 2009. Born in 1981. Production Manager. Representative, Unionen. Main education: Senior high school graduate, electronics. NOTE holdings: 0 shares.

Holdings include related party holdings.

Auditors

Öhrlings PricewaterhouseCoopers AB was elected Auditor of NOTE AB by the AGM 2008 for a term of four years.

Magnus Brändström

Born in 1962. Authorised Public Accountant and Partner of PwC. Senior Auditor.

Anders Magnussen

Born in 1966. Authorised Public Accountant and Partner of PwC.

Five-year summary

SEK m Summary Consolidated Income Statement	2009	2008	2007	2006	2005
Net sales	1,200.1	1,709.5	1,743.8	1,741.5	1,504.1
Gross profit/loss	26.4	123.0	224.6	206.5	54.2
Operating profit/loss	–90.8	–3.8	111.9	103.6	–64.3
Profit/loss after financial items	–97.9	–14.4	103.8	96.2	–73.1
Profit/loss after tax	–81.0	–13.1	78.2	68.6	–55.7
Summary Consolidated Balance Sheet
ASSETS
Non-current assets	234.6	247.1	200.6	167.7	184.5
Current assets	518.5	701.2	747.5	720.5	627.3
TOTAL ASSETS	753.1	948.3	948.1	888.2	811.7
EQUITY AND LIABILITIES
Equity	209.9	294.9	327.4	268.1	205.1
Non-current liabilities	30.5	98.4	140.1	157.9	107.9
Current liabilities	512.7	555.0	480.6	462.2	498.7
TOTAL EQUITY AND LIABILITIES	753.1	948.3	948.1	888.2	811.7
Cash flow, group
Cash flow from operating activities	42.6	83.2	48.3	46.8	69.9
Cash flow from investing activities	–18.7	–58.1	–48.8	–22.0	–79.5
CASH FLOW BEFORE FINANC ING ACT IVITIES	23.9	25.1	–0.5	24.8	–9.6
Cash and cash equivalents at beginning of period	35.9	38.5	18.8	9.1	20.1
Cash flow before financing activities	23.9	25.1	–0.5	24.8	–9.6
Cash flow from financing activities	–34.6	–30.1	19.8	–15.0	–1.5
Exchange rate difference in cash and cash equivalents	–0.8	2.4	0.4	–0.1	0.0
CASH AND CASH EQUIVALENTS AT END OF YEAR	24.4	35.9	38.5	18.8	9.1
Consolidated key figures
Margins
Operating margin, %	–7.6	–0.2	6.4	5.9	–4.3
Profit margin, %	–8.2	–0.8	6.0	5.5	–4.9
Returns
Return on operating capital, %	–18.8	–0.7	21.4	22.5	–14.3
Return on equity, %	–32.1	–4.2	26.3	29.0	–23.7
Capital structure
Operating capital (average)	483.6	548.7	521.9	459.9	449.1
Interest-bearing net debt	239.9	247.2	246.3	223.4	233.7
Equity to assets ratio, %	27.9	31.1	34.5	30.2	25.3
Net debt/equity ratio, multiple	1.1	0.8	0.8	0.8	1.1
Interest coverage ratio, multiple	–10.0	–0.1	7.1	12.3	–6.1
Capital turnover rate (operating capital), multiple	2.5	3.1	3.3	3.8	3.3
Market capitalisation
Market capitalisation at end of period	205	217	698	808	614
Employees
Sales per employee, SEK 000	1,228	1,423	1,489	1,545	1,371

Calculations of returns have been adapted to the Swedish Society of Financial Analysts' recommendations, and have also been re-stated for the comparative years 2006–2005.

Financial definitions

Market capitalisation

Share price multiplied by total number of outstanding shares

Equity per share

Equity as a percentage of the number of shares at year-end.

Attendance

Attendance as a percentage of regular working-hours.

Average number of employees

Average number of employees calculated on the basis of hours worked.

Rate of capital turnover (operating capital), multiple

Sales divided by operating capital.

Net investments in property, plant and equipment

Investments in property, plant and equipment for the year, excluding acquisitions of assets and liabilities, less disposals and obsolescence for the year.

Net debt/equity ratio, multiple

Interest-bearing net debt divided by equity.

Sales per employee

Net sales divided by the average number of full-time employees.

Operating capital

Total assets less cash and cash equivalents, non-interest bearing liabilities, provisions and minority interest.

Staff turnover

Number of employees whose employment was terminated voluntarily in the year as a percentage of the average number of employees.

Earnings per share

Profit after tax as a percentage of the average number of shares.

Return on equity

Net profit for the year as a percentage of the average equity for the most recent twelve-month period.

Return on operating capital

Operating profit as a percentage of the average operating capital for the most recent twelve-month period.

Interest-bearing net debt

Interest-bearing liabilities and provisions less cash.

Interest coverage ratio, multiple

Profit/loss after financial items plus financial expenses divided by financial expenses.

Operating margin

Operating profit/loss as a percentage of net sales.

Sickness absence

Sickness absence as a percentage of regular working-hours.

Equity to assets ratio

Equity as a percentage of total assets.

Profit margin

Profit/loss after financial items as a percentage of net sales.

The year 2009 was NOTE's fifth on the stock market. The number of shareholders increased by 27% in the year to 2,475 (1,954).

Share price performance

NOTE's share price fell by 5% in the year to a closing price of SEK 21.30 (22.50). The high in the year of SEK 28 was on 12 October. The low of SEK 15 was on 5 March. In the year, the OMXSSCPI rose by 62%.

At year-end, NOTE's market capitalisation was SEK 205 (217) m.

Turnover

Share turnover was 4,978,231 shares, or a rate of turnover of 51%. The average turnover of NOTE's share in 2009 was 19,834 shares.

Dividend

NOTE considers that the future growth and profitability potential of its operations are substantial. Against the background of planned structural measures, the Board is proposing to the AGM that no dividends are paid for the financial year 2009. This is a departure from NOTE's stated financial goal of dividends adapted to the average profit level during a business cycle, and will be 30–50% of profit after tax for the long term.

No dividends were paid for the financial year 2008.

Trading

Quotation	NASDAQ OMX Sweden Nordic List
Segment	Small Cap
Sector	Information Technology
Short name	NOTE
ISIN code	SE0001161654
Number of shares as of 30 December 2009	9,624,200

		Ten largest shareholders as of 30 December 2009, by holding
--	--	-------------------------------------------------------------	--	--	--	--

Name	No. of shares	Prop. of capital/ votes, %
Catella Fondförvaltning	1,212,040	12.59
Kjell-Åke Andersson with family	694,104	7.21
Banque Carnegie Luxembourg SA	577,700	6.00
Avanza Pension	522,034	5.42
Livförsäkrings AB Skandia	518,800	5.39
Garden Growth Capital LLC	487,500	5.07
MGA Placeringar AB	451,100	4.69
Verdipapirfond ODIN Sverige	431,653	4.49
Nordnet Pensionsförsäkring AB	330,803	3.44
Senior management	220,900	2.30
Total	5,446,634	56.60

Division by size of holding as of 30 December 2009

Size of holding	No. of share holders	No. of shares	Prop. of capital/ votes, %
1–500	1,602	314,786	3.27
501–2000	563	652,678	6.78
2,001–5,000	168	592,334	6.15
5,001–20,000	98	994,650	10.33
20,001–50,000	16	497,354	5.17
50,001–500,000	23	3,835,733	39.86
500,001–1,000,000	5	2,736,665	28.44
Total	2,475	9,624,200	100.00

Corporate Governance Report

Introduction

The regulatory structure applied for governing and controlling NOTE is primarily the Swedish Companies Act, stock market rules for issuers, the Swedish Code of Corporate Governance (the Code), accounting legislation—including the Swedish Bookkeeping Act and Annual Accounts Act—and internal guidelines and policies.

Non-compliance with the Code

NOTE observes the Code with the exception of the composition of

the Audit Committee. This instance of non-compliance is reported and explained in the section on the Audit Committee in the Corporate Governance Report.

Articles of Association

The Articles of Association are approved by the Annual General Meeting (AGM) and shall include a number of mandatory duties of more fundamental nature. The Articles of Association shall state items including the company's registered office, operations,

Laws and practice

More information on the laws and practice formalising Swedish corporate governance are available at sites including:

• The Swedish Corporate Governance Board, www.bolagsstyrning.se, where the Swedish Code of Corporate Governance is stated.
• NASDAQ OMX Stockholm AB, www.nasdaqomx.com, which states the rules for issuers.
• The Swedish Financial Supervisory Authority, www.fi.se, which states the Authority's statutes.

the size of the Board of Directors, the size of share capital, the number of shares and how the AGM is convened.

AGM

The AGM is the company's chief decision-making body and resolves on central matters such as adoption of the Income Statement and Balance Sheet, dividend to shareholders, composition of the Board of Directors, discharging the Board members and CEO from liability, amendments to the Articles of Association, election of Auditors and the principles for remunerating management. NOTE's AGM shall be held in Danderyd, Stockholm or Norrtälje, Sweden. Shareholders that notify the company of their intention to participate and are recorded in the share register on the record data are entitled to attend the Meeting, in person or by proxy. Each shareholder is entitled to have a matter considered by the AGM.

NOTE's AGM was held on 21 April 2009 at the Salén Conference Facility in Stockholm, Sweden. Shareholders representing a total of 59.6% of the capital and votes of the company participated. The Meeting resolved on matters including re-electing and electing members of the Board and approving their remuneration according to the proposal of the Nomination Committee, not to pay any dividends to shareholders for the financial year 2008 and to authorise the Board of Directors to decide on the acquisition and transfer of treasury shares.

	Members of the Nomination Committee for the AGM			2010

Nomination		Prop. of capital/votes, %
Committee member	Representing	30 Sep. 09	31 Dec. 09	26 Feb. 10
Stefan Charette	Investment Öresund AB	–	–	10.57
Ulf Strömsten	Catella Fondförvaltning	22.76	12.59	8.37
Kjell-Åke Andersson	Personal holdings	7.21	7.21	7.21
Bruce Grant	Garden Growth Capital	5.07	5.07	5.07

Nomination Committee

The AGM resolves on how the Nomination Committee is appointed. The AGM 2009 resolved that the Nomination Committee ahead of the forthcoming AGM shall be the formed by the four largest shareholders that wish to participate each appointing a representative including the Chairman of the company's Board of Directors, serving as convener, at least six months before the AGM. If one or more of the shareholders waives its right when Nomination Committee members are to be appointed, the next largest shareholder is then offered the corresponding opportunity.

NOTE's ownership structure changed in February 2010, resulting in Investment AB Öresund becoming, and Skandia Liv no longer being, one of the four largest shareholders of NOTE. The composition of NOTE's Nomination Committee also changed as a result of this.

The duty of the Nomination Committee is to consider and submit proposals to the AGM regarding:

• electing a Chairman of the Meeting
• electing a Chairman of the Board and Board members
• Directors' fees for the Chairman, other Board members and potential remuneration for committee work
• where applicable, election and remuneration of external Auditor
• decision on principles of composition of the Nomination Committee for the next AGM.

A report on the work of the Nomination Committee will be presented at the AGM 2010. No special remuneration was paid to the members of the Nomination Committee.

Auditors

The AGM appoints the Auditors, whose term is four years. The Auditors review the company's annual accounts, consolidated accounts and accounting records, and the administration by the Board of Directors and

CEO. The Senior Auditor also presents an Audit Report to the AGM.

The AGM 2008 elected Öhrlings PriceWaterhouseCoopers AB as audit firm, with Magnus Brändström as Senior Auditor and Anders Magnussen Joint Auditor for the period until the AGM 2012.

Board of Directors

The duty of the Board of Directors is to manage the company's affairs on behalf of the shareholders. The Board of Directors judges the group's financial situation on an ongoing basis, prepares budgets and annual financial statements. The Board of Directors is also responsible for formulating and monitoring the company's strategies, plans and objectives, decisions on acquisitions and divestments of operations, major investments, appointments and replacements of the CEO and senior management and ongoing monitoring of operations in the year.

Each year, the Board of Directors adopts an approvals list, finance policy, instructions for financial reporting and for the Board of Directors, and rules of procedure, which formalise matters including the division of responsibilities between the Board of Directors and the CEO, alongside the Instructions for the CEO.

The Chairman of the Board leads the Board of Directors' work and ensures that it is conducted pursuant to the Swedish Companies Act and other relevant legislation.

The Chairman is also responsible for maintaining contact with the group

management, and for ensuring that the Board's decisions are implemented appropriately.

NOTE's Board of Directors has seven members elected by the AGM. The Board of Directors has a general composition of sector knowledge and competence from Board activities and management of listed companies as well as accounting, sourcing operations, structural change and strategic development.

The AGM 2009 re-elected Bruce Grant, Håkan Gellerstedt, Göran Jansson and Per-Arne Sandström as Board members and elected Bo Andersson, Göran Gezelius and Göran Sigfridsson for the period until the next AGM. Bruce Grant was elected as Chairman of the Board. Göran Jansson was elected as Deputy Chairman with the special duty of supporting the Board of Directors and management on issues relating to the company's future structure.

		Independence
Board of Directors, 2009 Board member	Position	In relation to the company and management	In relation to the company's major shareholders
Bruce Grant	Chairman	Yes	Yes
Göran Jansson	Deputy Chairman	Yes*	Yes
Bo Andersson (elected 21 April 2009)	Member	Yes	Yes
Kjell-Åke Andersson (resigned 21 April 2009)	Member	Yes	Yes
Arne Forslund (resigned 21 April 2009)	Member	No**	Yes
Håkan Gellerstedt	Member	Yes	Yes
Göran Gezelius (elected 21 April 2009)	Member	Yes	Yes
Hans Johansson (resigned 21 April 2009)	Member	Yes	Yes
Per-Arne Sandström	Member	Yes	Yes
Göran Sigfridsson (elected 21 April 2009)	Member	Yes	Yes
Jimmy Almevind (Deputy since 15 August 2009, Member since year-end 2009)	Employee representative, Member	Yes	Yes
Christoffer Skogh (since 15 August 2009)	Employee representative, Member	Yes	Yes
Hans Westin (since 15 August 2009, resigned year-end 2009)	Employee representative, Member	Yes	Yes
Andreas Ollén (since 15 August 2009)	Employee representative, Deputy	Yes	Yes

*Acting President and CEO of NOTE since 24 January 2010.

** Then CEO of the company.

Two employee representatives have also served on the Board since August 2009, representing the trade unions IF Metall and Unionen.

Work of the Board of Directors in 2009

Each scheduled Board meeting conducts a review of current business conditions, results of operations and financial position of the group and outlook for the remainder of the year. In addition, the Board takes a

standpoint of over-arching issues such as the company's strategy, marketing and sales, budget and long-term operational planning.

The Board held ten Board meetings where minutes were taken in the financial year. The CEO and other employees of the company participated in Board meetings to submit reports. The company's Auditor attended one Board meeting in the year. The company's CFO served as secretary.

Remuneration Committee

The Remuneration Committee is appointed each year by the Board of Directors. Since the Board meeting following election in 2009, Bruce Grant and Göran Jansson have been the members of the Remuneration Committee.

The Board of Directors decides on remuneration and other employment terms for the President and other members of group management.

			Attendance statistics
of the Board Board member	Position	Board meetings	Remuneration Committee	Audit Committee	Directors' fees, SEK	Committee fees, SEK
Bruce Grant	Chairman	10/10	1/1*		200,000	15,000
Göran Jansson	Deputy Chairman	10/10	1/1*	3/3	150,000	45,000
Bo Andersson (elected 21 April 2009)	Member	6/10			100,000	–
Kjell-Åke Andersson (resigned 21 April 2009)	Member	3/10			–	–
Arne Forslund (resigned 21 April 2009)	Member	3/10			–	–
Håkan Gellerstedt	Member	10/10			100,000	–
Göran Gezelius (elected 21 April 2009)	Member	7/10			100,000	–
Hans Johansson (resigned 21 April 2009)	Member	3/10			–	–
Per-Arne Sandström	Member	9/10			100,000	–
Göran Sigfridsson (elected 21 April 2009)	Member	7/10			100,000	–
Jimmy Almevind (Deputy since 15 August 2009, Member since year-end 2009)	Employee representa tive, Member	3/10			–	–
Christoffer Skogh (since 15 August 2009)	Employee representa tive, Member	3/10			–	–
Hans Westin (since 15 August 2009, resigned year-end 2009)	Employee representa tive, Member	3/10			–	–
Andreas Ollén (since 15 August 2009)	Employee representa tive, Deputy	3/10			–	–

Attendance and remuneration

Fees are for the term May 2009 to April 2010, resolved by the AGM 2009.

* Due to the change-over of the CEO in 2009 and in early 2010, these matters were

considered by the whole Board after the first meeting of the Remuneration Committee.

The Nomination Committee considers decisions for the Board of Directors regarding salary levels of management.

The Remuneration Committee also submits proposals to the AGM regarding the guidelines of remuneration for the CEO and senior management.

The remuneration Committee held one meeting in the financial year. Due to the change of CEO in 2009 and in early 2010, these matters were then dealt with by the whole Board of Directors.

Audit Committee

In the financial year, the Audit Committee consisted of Göran Jansson. Accordingly, NOTE departs from the Code regarding the Board of Directors establishing an Audit Committee that should have at least three members. The Board judges that one member of the Audit Committee is sufficient considering the company's and the Board's size.

The duties of the Audit Committee are to:

• support the Board in its work on quality-assuring financial reporting

• discussing the audit and the view of the company's risks with the Auditors

• following up on external Auditors' reviews and appraising their work

• establishing guidelines for services in addition to auditing that the company may purchase from the Auditor
• support the Nomination Committee in preparing proposals for Auditors and their remuneration
• ensure that the company has systems for internal control
• functioning as a communication link between the Board and the company's Auditors.

Göran Jansson has a close and regular (at least quarterly) collaboration with the group's central accounting function regarding internal and external reporting of financial information. There is also a collaboration developed on matters of internal and external control, election and appraisal of auditing principles and models.

For the financial year 2009, Göran Jansson held three meetings with the company's Auditors where minutes were taken to discuss audit issues and internal controls. The Auditors' written reports were distributed to the whole Board after review and comments from the company.

For more information on the Board of Directors, see Operations on page 20.

Internal controls and risk management

The Board of Directors is responsible for internal controls of the company pursuant to the Swedish Companies Act.

Governance environment The division of roles and responsibilities for internal control between the Board of Directors and CEO is determined annually at the Board meeting following election via the rules of procedure for the Board of Directors and CEO and instructions for financial reporting. Ongoing activities to maintain effective internal controls have been delegated to, and are manage primarily by, the CEO and the group's central accounting function. The fundamental guidelines for internal control are managed via policies, instructions and similar governance documents.

The content of these documents is updated and evaluated where necessary. The Board of Directors is responsible for key governance documents, and the group's central accounting function is responsible for other documents. NOTE has also developed an internal reporting package for financial information, which is distributed and monitored monthly within the group.

Risk assessment

Through its operations, the company is exposed to a number of market risks. NOTE's finance policy states the limits within which financial risks should be managed. The finance policy is updated annually and adopted by the Board of Directors. In 2008, NOTE took a centralised initiative to formalise management of the biggest risks in operations.

The risks are evaluated from a matrix of probability and degree of financial effect. Existing control measures for the biggest risks in this matrix have been documented and additional controls introduced where required.

Considering that an increasing portion of production is in the group's foreign units, new processes for reporting inventories and analysis were developed in 2009.

Updating guidelines and limits regarding risk assessments is conducted at least yearly. For more information on risks and risk management, see Operations on page 13 and note 26, Financial risks and finance policy on pages 51–52.

Monitoring control activities

To rationalise the monitoring of internal controls, collective tools and methods to monitor potential shortcomings and weaknesses in internal controls have been created. Against

the background of an increasing share of production in NOTE's foreign units, the methodology for inventory reporting was developed in the year. Weak market conditions in manufacturing also triggered a sharper focus on accounts receivable—trade and payment times.

Each unit within NOTE is monitored in a monthly review by business area management. The matters considered at these meetings are financial information and controlling key ratios and monitoring of goal-oriented activities relating to quality, cost, delivery and growth.

The need for an internal audit function is evaluated yearly. Considering the group's limited size and scope, the Board of Directors considers that NOTE does not need a separate internal audit function. The practical management of internal controls is conducted by NOTE's central accounting function.

The group's operational governance CEO

NOTE's CEO leads its operating activities. This responsibility includes accounting matters, monitoring the group's strategies and business development, and ensuring that the Board gains the information necessary to be able to reach well-founded decisions. Written instructions define the division of responsibility between the Board of Directors and the CEO.

The CEO reports to the Board of Directors and attends each Board meeting, where the Board is informed about how operations are progressing on the basis of decisions taken. For more information on the CEO, see Operations on page 19.

Group management

NOTE's group management has four members who have ongoing responsibility for different parts of operations. This responsibility includes designing and executing the group's over-arching strategies. Group management held monthly meetings during the financial year to review results of operations, the conditions of operations and strategic and operational matters. For more information on group management, see Operations on page 18–19.

Governance of subsidiaries

Subsidiaries' operating activities are monitored monthly on the basis of a series of goals, including operating profit, working capital and cash flow.

Report of the Directors

OPERATIONS—GENERAL

NOTE is one of the Nordic region's leaders in manufacturing and logistics services for electronics-based products. NOTE is active on the EMS (Electronics Manufacturing Services) market and offers services in electronics production right through the value chain, from development and production to after-sales. The group comprises the parent company, wholly owned subsidiaries in Sweden, Norway, Finland, the UK, Estonia, Lithuania, Poland and China as well as a joint venture in Poland. NOTE also offers close-to-market production through the ems-ALLIANCE, an international network of electronics producers with partners in Brazil, India, the Philippines, Sweden and the US. Central sourcing entity NOTE Components coordinates sourcing agreements group-wide.

OPERATIONS IN 2009

When the financial crisis hit the world in autumn 2008, it fundamentally transformed NOTE's circumstances. All sectors and customer segments were affected more or less simultaneously, and volumes on then-current assignments quickly contracted. NOTE also faced a structural challenge when the biggest customer in the Telecom segment decided to amend its product offerings. Overall, sales fell by nearly 30% in 2009, year on year to SEK 1,200 (1,710) m.

NOTE's countermeasures to the recession were resolute—costs were cut sharply, and the process of transferring labour-intensive production and sourcing services to the group's units in low-cost countries continued. At year-end, some two-thirds of the group's staff were located in low-cost countries, against some one-third two years ago. The financial crisis accelerated this radical change of NOTE's cost structure.

Despite substantial cost savings, reduced sales meant that profits were unsatisfactory. NOTE posted a loss after financial items of SEK –98 m, of which SEK –64 m comprised restructuring and other nonrecurring costs.

Reduced demand also presented a major challenge to cash flow. Alongside customers, NOTE did a lot of work on balancing its stock. In the year, stock was down by 36%, making a significant contribution to NOTE posting a positive cash flow of SEK 24 m in the year.

In the fourth quarter, demand remained some 30% down year on year. As a result of the progressive impact of cost savings, the fourthquarter loss after financial items was limited to SEK –4 m. Progress in the Telecom segment resulted in NOTE discontinuing production of Its largest product in sales terms, and the divestment of the operation at Skellefteå.

Events in the financial year

AGM 2009—new Board members

The AGM on 21 April elected Bo Andersson, Göran Gezelius and Göran Sigfridsson as Board members of NOTE. The other Board members are Bruce Grant (Chairman), Göran Jansson (Deputy Chairman), Håkan Gellerstedt and Per-Arne Sandström.

Employee representatives from trade unions Unionen and IF Metall also joined the Board after the summer.

A market breakthrough for Nearsourcing

Kongsberg Defence & Aerospace of Norway decided to utilise NOTE's unique NOTEfied preferred parts database for developing new products building on its collaboration with the Nearsourcing Centre in Oslo.

In the year, new collaboration agreements were signed with customers including the following:

• OTRUM: development and volume production of electronics for a new generation of hotel TV systems.

• Telespor: volume production of sophisticated tracking technology based on GSM and GPS technology.

• Tour & Andersson: developing and producing balancing valves for waterborne heating and cooling systems.

• Radiocrafts: production of complete modules for wireless data transmission and energy and water consumption, for example.
• Radi Medical Systems: development and production of wireless instruments for measuring blood pressure in coronary arteries.

New President and CEO

On 3 June 2009, Knut Pogost was appointed NOTE's President and CEO. Mr. Pogost has been active in NOTE for over three years, most recently in the role of Executive Vice President heading strategic development. Mr. Pogost has many years' experience of executive positions in the electronics industry, with companies including Norwegian EMS vendor Kitron and Canadian component distributor Future Electronics.

Acquisition for more growth in Norway

NOTE acquired all the shares of Norwegian electronics producer Norteam Electronics AS at year-end 2008. This company focuses on services early in product lifecycles like producing prototypes and small-scale electronics production. Sales are some SEK 60 m and there were 40 staff at the time of the acquisition. These operations were merged with NOTE's Nearsourcing Centre in Oslo in the autumn, and in tandem with this process, were relocated to shared premises.

SALES AND PROFITS

Group

Sales in 2009 Demand in the year was characterised by the marked deterioration of the manufacturing cycle apparent in late-2008. Reduced activity in manufacturing and destocking has had a negative effect on NOTE's production and deliveries. New business sales progressed positively as planned. Considering the fairly long lead-times in the sector, only a limited portion of new business sales in the year started delivery. In the period, sales reduced by nearly 30% to SEK 1,200.1 (1,709.5) m. Extra sales from newly acquired units were SEK 54.8 m, or just over 4% of sales for the year. Thus in like-for-like terms, there was a reduction of 33%.

Demand in Industrial, NOTE's largest customer segment, is usually relatively stable in volume terms. One contributor is the relatively long product lifecycles in this customer segment. But mainly due to the weak economy, NOTE saw sales reduce by 25% in the year. Sharp downturns were apparent in segments including investment-intensive sectors like the mining and raw materials industries.

Compared to Industrial, demand from customers in the Telecom segment is inherently more volatile. Sales to customers in the Telecom segment fell by 47% in the year One strong contributor was NOTE's largest customer amending its product range and discontinuing one product, which was significant to NOTE. In this context, NOTE decided to cease production. These events led to the divestment of the operation at Skellefteå at year-end 2009.

Stabilisation of demand from manufacturing became apparent in the autumn, while new business sales started to exert a progressive impact.

Results of operations in 2009

NOTE's strategic initiative of centralising most of the group's sourcing function achieved the desired results in the year. Coordination of sourcing operations improved, simultaneous with the cost of electronic components and other production materials reducing as planned.

Apart from costs of material, personnel costs are completely dominant in NOTE's operations.

The relocation of labour-intensive production to the group's units in low-cost countries began back in early-2008. This initiative generated substantial staffing changes and downsizing of organisational resources, primarily in NOTE's Swedish business. Compared to the previous year-end, staffing in Sweden reduced by 41%.

These measures have made a significant positive change to the group's cost structure. In like-for-like terms, and adjusted for nonrecurring costs, costs in the period were down some 25% year on year.

However, staff downsizing progressed more slowly than originally planned, which affected profits negatively in the year. Some SEK 10 m of the SEK 31 m restructuring provision created in the fourth quarter of the previous year for staff downsizing, remained at the end of the period. Shorter working-hours have been introduced at several units as another savings measure against reducing production and sales volumes. Capacity utilisation in several production plants was lower than last year. Despite extensive cost-cutting and reduced cost of materials, volume contraction meant that gross margins weakened to 2.2 (7.2)%. Adjusted for non-recurring costs, gross margins were some 6.8 (10.0)%.

Through continued rationalisation and good cost control, and adjusted for costs associated with the change of CEO in June, overheads fell by over 15%. Other operating revenue/costs include negative currency effects of SEK –5.5 (5.1) m.

Parent company

Parent company NOTE AB (publ) is primarily focused on the management, coordination and development of the group. In the period, revenue was SEK 45.9 (64.9) m and mainly related to intra-group services. The profit/loss after financial items was SEK –25.2 (–5.7) m.

For more information, see note 19 Close relations on page 60.

FINANCIAL POSITION AND LIQUIDITY Cash flow

NOTE's operations address the EMS market segment usually known as high mix/low volume. Like other medium-sized players on this market, NOTE is facing a significant challenge in developing effective business models, in terms of stock control and logistics. This is especially clear in rapid demand fluctuations and is mainly associated with the complexity of electronics production and the long lead-times for electronics components.

Accordingly, the sharp decline in demand that occurred at the end of last year has entailed extensive efforts alongside customers and suppliers to adapt stock to the lower sales level. This work was simultaneous with the transfer of labour-intensive production to low-cost countries. This has temporarily raised the requirement on capital tied-up, primarily in the form of buffer stocks to ensure high delivery capacity during the ongoing transfer process. Since the end of the first quarter of the year, capital tied up in stock has gradually reduced. At the end of the third quarter, a settlement on deliveries and return of materials was reached with NOTE's largest customer in Telecom, which eliminated the surplus stocks of telecom products that had strained liquidity until that time. Stock reduced by SEK 125 m, or 36% in the year. NOTE perceives good prospects of continuing to rationalise its capital tied up in stock.

Against the background of the volume contraction on the market that started back in late-2008, accounts receivable—trade at yearend were down 15% year on year. Compared to the end of the third quarter, partly due to the settlement in Telecom, accounts receivable—trade were down 9%.

Due to reduced volumes and de-stocking, accounts payable trade, which relate mainly to sourcing electronic components and other production materials, were down 26% on year-end, and basically the same level as at the end of the third quarter of the year.

Mainly as a result of work on reducing capital tied-up in stock, cash flow progressed positively. In total for the year, cash flow (after investments) was SEK 23.9 (25.1) m, equivalent to SEK 2.48 (2.61) per share.

Equity to assets ratio

The equity to assets ratio was 27.9 (31.1)% at the end of the period, down 3.2 percentage points in the year.

Liquidity

NOTE arranged a new funding facility with its bank connection in the first quarter. The new funding facility is a combination of debt factoring and traditional overdraft facilities. As planned, this new solution became effective early in the second quarter, when factoring credits were successively built up and replaced previous loans. As a consequence of the new funding facility, pledged factoring credits were some SEK 189 m at year-end.

In the year, NOTE worked extensively on improving the group's liquidity and cash flow, and accordingly, liquidity at the end of the period was good. Available cash and cash equivalents including unutilised overdraft facilities were SEK 50.7 (84.6) m.

INVESTMENTS

NOTE's realignment over the past two years has involved relatively large-scale investments, for initiatives including start-ups of Nearsourcing centres on new geographical markets and expanding production capacity in foreign Industrial Plants.

Total investments in the period were SEK 18.7 (58.1) m, corresponding to 1.6 (3.4)% of sales. Depreciation and amortisation was SEK 36.3 (32.3) m.

NOTE completed the acquisition of the IONOTE electronics plant in China at year-end 2009. This plant was previously run as a joint venture with NOTE's partner in Asia. The operations of IONOTE were developed in the year to satisfy customers' increasing needs for direct sales to the Chinese market.

RESEARCH AND DEVELOPMENT ACTIVITIES

Through its operations, NOTE is closely involved in its customers' development processes, including contributing to the industrialisation phase, guiding and developing production processes for its customers, using its substantial electronics manufacturing competence. These activities are continuous and not reported separately in the accounts.

No development processes were capitalised in the Balance Sheet in the year.

The NOTE share

There are a total of 9,624,200 shares of the company, with all shares of the same class and having a quotient value of SEK 0.50 per share. There are no limitations on transferring shares in the form of preemption clauses or similar that the company is aware of. As of the reporting date there was one shareholder with a shareholding of more than 10%, Catella Fondförvaltning with 12.59% of the votes.

The company's Board members are elected annually by the AGM, which also approves amendments to the Articles of Association. Otherwise, there are no known circumstances that could affect possibilities to acquire the company through a public offering for the shares of NOTE.

HUMAN RESOURCES

The average number of full-time employees was 977 (1,201) in the year, 470 (604) of them being women and 507 (597) men. At year-end 2009, NOTE had 1,100 (1,205) employees.

Work attendance was 97.6 (97.0)% of regular working-hours in NOTE's Swedish operations and staff turnover was 5.0 (6.0)%. Total group work attendance was 96.4 (95.7)% of scheduled working-hours and staff turnover was 3.6 (11.1)%.

For more information on NOTE's employees see Operations on page 16.

GUIDELINES FOR REMUNERATING SENIOR MANAGEMENT

Senior management means the President and members of NOTE AB's management. For 2010, the following guidelines for remunerating management are proposed: basic salary will consider individual responsibilities, experience and performance and will be subject to annual review.

Performance-related pay is dependent on individual satisfaction of quantitative and qualitative goals and may be a maximum of 100% of basic salary. Pensionable age is 65. NOTE offers benefits similar to the ITP scheme (supplementary pensions for salaried employees). The dismissal pay and severance pay of an executive may not exceed an aggregate maximum of remuneration over 24 months. The Board is entitled to depart from these guidelines if there are special circumstances in individual cases. Remuneration to the management of NOTE in 2009 was decided in accordance with the adopted guidelines formulated by the Board of Directors, which were then approved by the AGM 2009. In 2009, the same guidelines as the aforementioned proposal to the AGM 2010 were adopted. For more information, see note 7, Employees, personnel expenses and remuneration to senior management on page 44.

ENVIRONMENT

Reporting obligation and certification

The group conducts business in a Swedish subsidiary holding permits pursuant to the Swedish ordinance on environmentally hazardous activities and health (reference SFS 1998:899). Two facilities are subject to permits and one Swedish facility is partially subject to permit.

Eight of the group's facilities have ISO 14001 environmental certification.

EU directives

The WEEE directive regulates the processing of electronic waste. Because NOTE does not have producer liability, no provisioning for processing electronic waste from consumer electronics has been made pursuant to IFRIC 6. This responsibility rests with the product owners. The EU REACH regulation formalises the usage of chemicals. NOTE is classed as a downstream user and/or end-user of chemicals, and is only subject to the obligation to register substances and prepare risk assessments in those cases were the company uses what are known as SVCH materials.

For more information on NOTE's environmental matters, see Operations on page 14.

SIGNIFICANT RISKS OF OPERATIONS Operational risks

NOTE provides manufacturing and logistics services for electronicsbased products. NOTE's role includes being a collaboration partner for its customers, but not a product owner.

NOTE's main customer groups are industrial and telecom corporations. Because the telecom market has been volatile historically, with rapid fluctuations in demand, this can be considered a significant risk in operations. Like other medium-sized EMS enterprises, NOTE faces a sizeable challenge in enhancing its inventory control and logistics to minimise these business risks.

The electronics manufacturing services (EMS) market is relatively young and usually considered fairly cyclical. Historically, many EMS companies have encountered difficulty maintaining profitability in recessions. This fact has been important in NOTE's choice of future strategy. NOTE's forward-looking emphasis on Nearsourcing, intended to promote the combination of volume growth and low investment costs and overheads, is one way of reducing its operational risk.

Because about 60% of sales are of materials, access to such materials is a risk for the company. Increased lead-times and larger component reserves to reduce lead-times increase risk exposure on the materials side.

Financial risks

Through Its operations, the group is exposed to different forms of financial risk, such as borrowing and interest risk, currency risk, as well as liquidity and credit risks. The group is financed essentially through equity, loans and accounts payable—trade. Depending on economic and market conditions, NOTE's prospects of securing the required funding and liquidity should be considered as a significant risk. Against the background of weak market conditions in the year, extensive measures were taken to secure the group's funding including arranging a new funding agreement with NOTE's bank connection early in the year.

The group's currency risk is mainly due to purchasing of production material, where the majority of the group's invoicing is denominated in Swedish kronor. Expenses denominated in foreign currency are hedged partly through binding agreements, where the customer bears the currency risks, and partly through cash flow hedges. The hedged currencies are USD and EUR. The group's customers are diversified across several sectors, limiting exposure to credit risks in accounts receivable—trade. For more information see note 26, Financial risks and finance policy on page 51.

SUBSEQUENT EVENTS

For information on the group's subsequent events, see note 32 Subsequent events on page 53.

EXPECTATIONS OF FUTURE PROGRESS

As part of NOTE's continued structural transformation, an overhaul of the group's units has begun. NOTE will ensure that it utilises its unique strengths and competence in the high mix/low volume market segment even better. The objective is to take savings and rationalisation measures that create a positive profit effect of at least SEK 50 m in annualised terms during 2010. As part of this package, NOTE will further concentrate its production units in Sweden and internationally. The estimated cost of this rationalisation package is some SEK 45 m, which will be charged to profits in the first quarter of 2010.

Proposed appropriation of profits

The Board of Directors and CEO propose that profit be appropriated as follows (SEK):

Total	104,142,027
Carried forward	104,142,027
Total	104,142,027
Profit/loss after tax	17,952,649
Brought forward	86,189,378

Regarding NOTE's results of operations and financial position otherwise, the reader is referred to the following Income Statement and Balance Sheet with the associated notes to the accounts.

NOTE's financial year is 1 January to 31 December inclusive. All amounts are in SEK 000 unless otherwise indicated.

Consolidated Income Statement

SEK 000	NOTE	2009	2008
Net revenue	2, 3	1,200,063	1,709,450
Cost of goods sold and services		–1,173,630	–1,586,439
Gross profit/loss		26,433	123,011
Selling expenses		–48,196	–56,799
Administrative expenses		–64,787	–75,673
Other operating revenue	5	38,133	25,808
Other operating expenses	6	–42,380	–20,170
Operating profit/loss	3, 7, 8, 9, 27	–90,797	–3,823
Financial income		1,813	2,275
Financial expenses		–8,941	–12,838
Net financial income/expense	10	–7,128	–10,563
Profit/loss before tax		–97,925	–14,386
Tax	11	16,906	1,250
Profit/loss after tax		–81,019	–13,136
Basic and diluted earnings per share, SEK	19	–8.42	–1.36

Consolidated Statement of Comprehensive Income

SEK 000	NOTE	2009	2008
Profit/loss after tax		–81,019	–13,136
Other comprehensive income:
Exchange rate differences		–3,673	6,944
Cash flow hedges		–313	313
Total other comprehensive income		–3,986	7,257
Total comprehensive income for the year		–85,005	–5,879

Consolidated Balance Sheet

SEK 000	NOTE	31 Dec 2009	31 Dec 2008
Assets	3, 4, 5, 14
Intangible assets	12	81,465	76,357
Property, plant and equipment	3, 13	122,045	141,859
Long-term receivables	15	2,621	4,849
Deferred tax assets	11	28,410	23,992
Total non-current assets		234,541	247,057
Inventories	16	217,887	342,898
Accounts receivable—trade	25, 26	231,871	272,686
Prepaid expenses and accrued income	17	13,331	14,033
Tax receivables		8,229	8,669
Other receivables	15	22,777	26,997
Cash and cash equivalents	30	24,416	35,941
Total current assets		518,511	701,224
TOTAL ASSETS		753,052	948,281
Equity	18
Share capital (9,624,200 class A shares)		4,812	4,812
Other paid-up capital		148,100	148,100
Reserves		5,786	9,772
Retained profit including profit/loss for the period		51,230	132,250
Equity		209,928	294,934
Liabilities	4, 5, 14
Long-term interest-bearing liabilities	20, 25, 26	13,977	62,073
Pension commitments	21, 22	12,748	11,961
Other provisions	22	153	128
Deferred tax liabilities	11	3,590	19,581
Other non-current liabilities	14	–	4,608
Total non-current liabilities		30,468	98,351
Current interest-bearing liabilities	20, 25, 26	237,562	209,049
Accounts payable—trade	25	153,917	208,630
Tax liabilities		498	2,835
Other liabilities	23	35,614	30,475
Accrued expenses and deferred income	24	46,767	62,767
Other provisions	22	38,298	41,240
Total current liabilities		512,656	554,996
TOTAL EQUITY AND LIABILITIES		753,052	948,281

For information on the group's pledged assets and contingent liabilities see note 28 on page 52.

Consolidated Statement of Changes in Equity

	Share	Other paid-up		Retained profit inc. profit/loss	Total
SEK 000	capital	capital	Reserves	after tax	equity
Opening equity, 1 Jan 2008	4,812	148,100	2,515	171,987	327,414
Comprehensive income
Profit/loss after tax	–	–	–	–13,136	–13,136
Other comprehensive income
Exchange rate differences	–	–	6,944	–	6,944
Cash flow hedges	–	–	313	–	313
Total comprehensive income	–	–	7,257	–13,136	–5,879
Transactions with equity holders
Dividend	–	–	–	–26,467	–26,467
Profit/loss from divested warrants	–	–	–	–134	–134
Closing equity, 31 Dec 2008	4,812	148,100	9,772	132,250	294,934

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit inc. profit/loss after tax	Total equity
Opening equity, 1 Jan 2009	4,812	148,100	9,772	132,250	294,934
Comprehensive income
Profit/loss after tax	–	–	–	–81,019	–81,019
Other comprehensive income
Exchange rate differences	–	–	–3,673	–	–3,673
Cash flow hedges	–	–	–313	–	–313
Total comprehensive income	–	–	–3,986	–	–3,986
Closing equity, 31 Dec 2009	4,812	148,100	5,786	51,230	209,928

Consolidated Cash Flow Statement

SEK 000	NOTE	2009	2008
	30
Operating activities
Profit/loss before tax		–97,925	–14,386
Reversed depreciation		36,312	32,252
Other non-cash items		36,672	35,737
Tax paid		–4,993	–25,836
		–29,934	27,767
Change in working capital
Increase (–)/decrease (+) in inventories		108,360	–6,715
Increase (–)/decrease (+) in trade receivables		73,462	63,134
Increase (+)/decrease (–) in trade liabilities		–109,320 72,502	–1,035 55,384
Cash flow from operating activities		42,568	83,151
Investing activities
Purchase of property, plant and equipment		–11,957	–38,961
Sale of property, plant and equipment		2,663	6,231
Purchase of intangible assets		–4,525	–7,569
Purchase of joint venture, net liquidity effect		–	–7,180
Purchase of subsidiaries/operations, net liquidity effect		–4,835	–10,640
Sale of financial assets		–	41
Cash flow from investing activities		–18,654	–58,078
Financing activities
Borrowings		50,000	16,371
Amortisation of loans		–84,599	–20,004
Dividend paid		–	–26,467
Cash flow from financing activities		–34,599	–30,100
Cash flow for the year		–10,685	–5,027
Cash and cash equivalents
At beginning of period		35,941	38,546
Cash flow before financing activities		23,914	25,073
Cash flow from financing activities		–34,599	–30,100
Exchange rate difference in cash and cash equivalents		–840	2,422
Cash and cash equivalents at end of period		24,416	35,941

Notes on the consolidated financial statements

Note 1 Critical accounting principles

Consistency with standards and law

The consolidated accounts have been prepared pursuant to International Financial Reporting Standards (IFRS ) issued by the International Accounting Standards Board (IASB) and interpretation statements from the International Financial Reporting Interpretations Committee (IFRIC), which have been endorsed by the EU Commission for adoption in the EU. RFR's (Rådet för finansiell rapportering, the Swedish Financial Reporting Board) recommendation RFR 2.2, Supplementary Accounting Rules for Groups, has been applied.

Basis of preparation of the consolidated financial statements

The parent company's functional currency is the Swedish krona, which is also the presentation currency for the parent company and group. Unless otherwise stated, all amounts are rounded to the nearest thousand.

Judgements made by management when applying IFRS that have a significant impact on the financial statements and estimates made that may imply significant adjustments to following years' financial statements are reviewed in more detail in note 31.

The following accounting principles for the group have been applied consistently for all periods presented in the consolidated accounts, unless stated otherwise below. The group's accounting principles have been applied consistently on reporting and consolidating the parent company and subsidiaries.

The annual accounts and consolidated accounts were approved by the Board for issuance on 29 March 2010. The Consolidated Income Statement and Balance Sheet will be subject to adoption at the AGM (Annual General Meeting) on 27 April 2010.

GROUP

Revised accounting principles

The following new standards and interpretation statements were adopted when preparing the financial statements for 2009:

IFRS 2 (Amendment), "Share-based Payment" (applies from 1 January 2009). This revised standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. The group is applying IFRS 2 (Amendment) from 1 January 2009, but it has no effect on the consolidated financial statements.

IAS 1 (Revised), "Presentation of Financial Statements" (applies from 1 January 2009). The revised standard prohibits presentation of revenue and expense items (i.e. changes in equity not relating to transactions with equity holders) in the Statement of Changes in Equity, but requires that "changes in equity not relating to transactions with equity holders" are reported separately from changes in equity relating to transactions with equity holders in a statement of comprehensive income. Accordingly, the group presents all changes related to equity holders in its Consolidated Statement of Changes in Equity, while all changes in equity not relating to transactions with equity holders are reported in the Consolidated Statement of Comprehensive Income. Comparative information has been re-stated so that it is consistent with the revised standard. Because this amendment to the accounting principle only affects presentation, it has no effect on earnings per share.

IFRS 8 "Operating Segments." IFRS 8 replaces IAS 14, "Segment Reporting" and adapts segment reporting to the requirements of the US standard SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." The new standard requires that segment information is presented from management perspective, which means that it is presented in the way used in internal reporting. The group is applying IFRS 8 "Operating Segments" from 1 January 2009 onwards. Because this amendment of the accounting principle only affects presentation, it has no effect on earnings per share.

IFRS 7 (Amendment) "Financial Instruments—Disclosures"—applies from 1 January 2009. The amendment requires additional disclosures on measurement at fair value and liquidity risk. Particularly, the amendment requires disclosure of measurement at fair value by tier in a valuation hierarchy. Because this amendment only involves additional disclosures, it has no effect on earnings per share.

IAS 23 (Amendment), "Borrowing Costs." This amendment deals with reporting of borrowing costs that are directly related to purchasing, constructing or producing an asset that takes significant time to complete for use or sale. These borrowing costs are capitalised as a part of the cost of the asset. This amendment of the accounting principle is a result of the application of the transition rules of IAS 23, Borrowing Costs (2007). Accordingly, comparative information has not been re-stated. The Amendment of this accounting principle has no material effect on earnings per share.

New IFRS and interpretation statements that have not yet been adopted

The following new standards, amendments to standards and interpretation statements come into effect from the financial year 2010 onwards and have not been adopted when preparing these financial statements.

IFRIC 17, "Distribution of Non-cash Assets to Owners." (Applies to financial years beginning 1 July 2009 or later). This interpretation statement is part of IASB's annual improvement project, published in April 2009. This interpretation statement offers guidance on reporting agreements by which the company distributes assets in kind to shareholders. An amendment has also been made to IFRS 5, which requires assets to be classified as held for distribution only if the assets are available for distribution in their current condition and distribution is very likely. The group will be applying IFRIC 17 from 1 January 2010 onwards but is not expected to have any material effect on the consolidated financial statements.

IAS 27 (Amendment), "Consolidated and Separate Financial Statements" (applies from 1 July 2009). The revised standard requires that the effects of all transactions with holders without controlling influence are reported in equity if they do not imply any change in the controlling influence and these transactions do not give rise to goodwill or gains and losses. The standard also states that when a parent company relinquishes controlling influence, potential remaining participations should be re-stated at fair value, and a gain or loss reported in the Income Statement. The group will be applying IAS 27 (Amendment) proactively for transactions with holders without controlling influence from 1 January 2010.

IFRS 3 (Revised), "Business Combinations" (applies from 1 July 2009). The revised standard continues to stipulate that acquisition accounting is applied for business combinations, albeit with some significant amendments. For example, all payments to acquire an

operation are reported at actual value on the acquisition date, while subsequent conditional payments are classified as liabilities, which are then restated via the Income Statement. Holdings without controlling influence in the acquired operation may either be reported at fair value or the proportional share of the acquired operation's net assets held by the holder without controlling influence. All transaction costs relating to the acquisition must be expensed. The group will apply IFRS 3 (Revised) proactively for all business combinations from 1 January 2010.

IAS 38 (Amendment), "Intangible Assets." This amendment is part of IASB's annual improvement project published in April 2009 and the group will be applying IAS 38 (Amendment) from the same time as IFRS 3 (revised). This amendment provides clarification on the measurement of an intangible asset acquired in a business combination at fair value. According to this amendment, intangible assets may be grouped and treated as a single asset when the assets have similar useful lives. This amendment will not have any material effect on the consolidated financial statements.

IFRS 5 (Amendment), "Non-current Assets Held for Sale and Discontinued Operations." This amendment is part of IASB's annual improvement project published in April 2009. The amendment clarifies that IFRS 5 specifies the disclosure requirements for non-current assets (or disposal groups) classified as non-current assets held for sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still applies, especially point 15 (to provide a true and fair view) and point 125 (sources of uncertainty in estimates). The group will be applying IFRS 5 (Amendment) from 1 January 2010. This amendment is not expected to have any material effect on the consolidated financial statements.

IAS 1 (Amendment), "Presentation of Financial Statements." This amendment is part of IASB's annual improvement project published in April 2009. The amendment clarifies that the potential settlement of a liability through the issue of shares is not relevant to its classification as current or non-current. Through the amendment in the definition of current liabilities, the amendment permits a liability being classified as non-current (providing the company has an unconditional right to delay settlement through transfer of cash funds or other assets for at least 12 months after the end of the financial year) despite the counterparty being able to demand settlement with shares at any time. The group will be applying IAS 1 (Amendment) from 1 January 2010. It is not expected to have any material effect on the consolidated financial statements.

IFRS 2 (Amendment), "Group Cash-settled and Share-based Payment Transactions." This amendment implies that IFRIC 8 (Scope of IFRS 2) and IFRIC 11 "IFRS 2—Group and Treasury Share Transactions" are incorporated into the standard. The previous guidance of IFRIC 11 is also supplemented regarding the classification of intra-group transactions, which are not dealt with in the interpretation statement. This new guidance is not expected to have any significant effect on the consolidated financial statements.

IFRS 9, "Financial Instruments" (applies to financial years starting 1 January 2013 or later). IFRS 9 deals with the measurement and classification of financial instruments. It includes two primary measurement categories: amortised cost and fair value. Classification is based on the company's business model and the characteristics of contracted cash flows. If the company's business model is to hold the financial asset with the purpose of receiving contracted cash flows and the contracted cash flows exclusively comprise principal and interest, measurement should be at amortised cost. All other financial assets should be measured at fair value. Before it comes into effect, the standard will be supplemented by further parts relating to items including liabilities, impairment and hedge accounting. when the standard is complete, its effect on the consolidated financial statements will be evaluated.

Segment reporting

Operating segments are reported in a manner consistent with internal reporting submitted to the chief operating decision maker. The chief operating decision maker is that function with responsibility for allocating resources and judging the results of an operating segment. In the group, this function has been identified as the Chief Executive Officer, who takes strategic decisions.

Classification, etc.

Essentially, the non-current assets and non-current liabilities of the group exclusively comprise amounts expected to be recovered or paid after more than 12 months from year-end. Essentially, the current assets and current liabilities of the group only comprise amounts expected to be recovered or paid within 12 months of year-end.

Consolidation principles

Subsidiaries Subsidiaries are companies under the controlling influence of NOTE AB. A controlling influence implies the direct or indirect right to formulate a company's financial and operational strategies with the aim of receiving economic benefits. When judging whether a controlling influence exists, potential shares conferring voting rights that can be exercised or converted without delay are considered.

The group comprises the parent company and 18 wholly owned companies. Subsidiaries are reported pursuant to acquisition accounting. Acquisition accounting means that acquisition of a subsidiary is considered as a transaction whereby the group indirectly acquires the subsidiary's assets and takes over its liabilities and contingent liabilities. The consolidated cost is determined using an acquisition analysis relating to the acquisition. This analysis determines partly the cost of participations or operation, and partly the fair value of acquired identifiable assets and liabilities and contingent liabilities taken over on the acquisition date. The cost of subsidiary shares and operations is the total of the fair value of assets paid, liabilities arising or taken over, and for equity instruments issued that are submitted as payment in exchange for the acquired net assets, and transaction expenses directly attributable to the acquisition, on the acquisition date. In business combinations where the acquisition cost exceeds the fair value of acquired assets and liabilities and contingent liabilities taken over that are reported separately, the difference is reported as goodwill.

When the difference is negative, this is reported directly in the Income Statement. Subsidiary financial statements are consolidated from the acquisition date until the date the controlling influence ceases.

Joint ventures

In accounting terms, joint ventures are the companies where the group has a joint controlling influence over operational and financial controls through collaboration agreements with one or more parties. In the consolidated accounts, holdings in joint ventures are reported using the proportional method. The proportional method means that the group's participating interest in the companies' revenue and expenses, assets and liabilities respectively are reported in the Consolidated Income Statement and Balance Sheet. This is effected by the joint owners' share of assets and liabilities, revenues and expenses in a joint venture being aggregated item by item with the corresponding item in the joint owner's consolidated accounts.

Only equity accrued after the acquisition is reported in consolidated equity. The method applies from the time when the joint controlling influence is attained and until the time when the joint controlling influence ceases.

Transactions to be eliminated upon consolidation

Intra-group receivables and liabilities, revenues or costs and un-realised profits or losses arising from intra-group transactions are eliminated wholly when the consolidated accounts are prepared. Un-realised gains that arise from transactions with joint ventures are eliminated to the extent corresponding to the group's participating interest in the company. Un-realised losses are eliminated in the same way as un-realised gains, but only to the extent there is no value impairment.

Foreign currency

Foreign currency transactions

Foreign currency transactions are translated to the functional currency (SEK) at the rate of exchange ruling on the transaction date. Foreign currency monetary assets and liabilities are translated to the functional currency at the rates of exchange ruling at the reporting date. The exchange rate differences arising upon conversion are reported in the Income Statement.

Financial statements of foreign operations

The assets and liabilities of foreign operations including goodwill and other consolidated surpluses and deficits are translated to Swedish krona at the rates of exchange ruling at the reporting date. The revenues and expenses of foreign operations are translated to Swedish krona at an average rate of exchange, which is an approximation of the rates of exchange ruling at each transaction date. Translation differences arising from the currency translation of foreign operations are reported directly against equity as a translation reserve.

Revenues

Sales of goods and executing services assignments

Revenues from the sale of goods and manufacturing services are reported to the Income Statement when the significant risks and benefits associated with ownership of the product have been transferred to the buyer and when it is probable that the future economic benefits will accrue for the company and these benefits can be measured reliably. If there is significant uncertainty regarding payment, associated expenses or the risk of returns, and if NOTE retains a commitment in the ongoing management usually associated with ownership, no revenues are recognised. Revenues only include the gross inflows of economic benefits the company receives, or may receive, on its own behalf. Revenues are reported at the actual value of what is received, or will be received, less deductions for discounting. Revenues for consulting services are reported according to the percentage of completion method provided that the labour hours incurred are measurable.

Central government support

Central government support is reported pursuant to IAS 20. Central government subsidies are reported in the Income Statement and Balance Sheet when they are received. Central government subsidies received as remuneration for expenses that have already reduced profits in previous periods are reported in the Income Statement in the period when the receivable from central government arises. Central government subsidies for investments are reported as a reduction of the carrying amount of the asset.

Lease arrangements and financial income and expenses

In the consolidated accounts, leases are classified as finance or operating leases. Finance leases occur when essentially, the financial risks and benefits associated with ownership transfer to the lessee. If this is not the case, the arrangement is an operating lease.

Operating leases

Payments for operating lease arrangements are reported in the Income Statement on a straight-line basis over the lease term. Benefits received on signing a contract are reported as a portion of the total lease expense in the Income Statement.

Finance leases

Assets held through finance lease arrangements are reported as assets in the Consolidated Balance Sheet pursuant to the principles for owned assets. The obligation to pay future lease payments is reported as long-term and current liabilities.

Minimum lease payments are allocated between interest expenses and amortisation of the outstanding liability. Interest expenses are allocated over the lease term so that each accounting period is subject to an amount corresponding to a fixed interest rate for the liability reported in each period. Variable expenditure is expensed in the periods it occurs.

Financial income and expenses

Financial income and expenses comprise interest income on bank balances and receivables, interest expenses on loans, exchange rate differences and un-realised and realised gains on financial investments and derivative instruments used in financing activities. Interest income/expenses are reported according to the effective interest method. Effective interest is the interest that discounts estimated future payments received and made during the expected term of a financial instrument, at the financial asset's or liability's reported net value. The calculation includes all expenditure paid or received from contract counterparties that is a part of effective interest, transaction expenses and all other premiums and discounts.

Financial instruments

In the group, financial instruments are measured and reported pursuant to the stipulations of IAS 39. On the assets side, financial instruments reported in the Balance Sheet include cash and cash equivalents, accounts receivable—trade and loans receivable. Accounts payable—trade and borrowings are reported under liabilities and equity.

A financial asset or financial liability is reported in the Balance Sheet when the company becomes party to the instrument's contracted terms. Accounts receivable—trade are reported in the Balance Sheet when invoices are sent. Liabilities are reported when the counterparty has delivered and there is a contracted obligation to pay, even if no invoice has been received. Accounts payable—trade are reported when invoices are received.

A financial asset is removed from the Balance Sheet when the contracted rights are realised, mature or the company relinquishes control over them. The same applies to part of a financial asset. A financial liability is removed from the Balance Sheet when the contracted commitment is satisfied or otherwise extinguished. The same applies to part of a financial liability. A financial asset and financial liability is offset and reported at a net amount in the Balance Sheet only when there is a legal right to offset the amount and there is an intention to settle the items at a net amount or to simultaneously realise the asset and settle the liability. Acquisitions and divestments of financial assets are reported on the transaction date, which is the date the company undertakes to acquire or divest the asset. Financial instruments are initially reported at cost corresponding to the instruments'

fair value plus transaction expenses for all financial instruments. Subsequent reporting depends on the following classification. IAS 39 classifies financial instruments in categories. This classification depends on the

purpose of the acquisition of the financial instrument. Management determines the classification at the original time of acquisition. The categories are as follows:

Loans receivable and accounts receivable—trade

'Loans receivable and accounts receivable—trade' are financial assets that are not derivatives with fixed payments or payments that can be determined, and are not listed on an active market. The receivables occur when the company supplies funds, goods or services directly to the borrower without the intention of conducting trade in the claim. This category also includes acquired receivables. These assets are initially reported at fair value, and then at amortised cost by applying the effective interest method, less potential deductions for depreciation.

Other financial liabilities

Loans and other financial liabilities such as accounts payable—trade are included in this category. The liabilities are initially reported at fair value and then at amortised cost by applying the effective interest method, less potential deductions for depreciation.

Financial assets reported at fair value via the Income Statement

Financial instruments in this category are reported continuously at fair value with value changes reported in the Income Statement. Financial assets measured at fair value via the Income Statement are financial assets held for trading. A financial asset is classified in this category if the main purpose of acquisition is for sale in the short term. Derivatives are classified as held for trading unless they are identified as hedges. Assets in this category are classified as current assets.

In some cases, the group utilises currency forward contracts for the financial hedging of currency transactions. Initially, derivatives are reported at fair value, implying that transaction costs are charged to profit for the period. After initial reporting, derivative instruments are reported at fair value, with value changes reported in the Income Statement.

Cash Flow Hedging

Currency exposure regarding future forecast flows is partly hedged through currency forwards. Currency forwards that hedge future flows are reported in the Balance Sheet at fair value. Accumulated amounts in equity are reversed to the Income Statement in those periods when the hedged item affects profits (for example when the forecast sale that is hedged takes place).

When a hedging instrument matures or is sold, or when the hedge no longer satisfies the criteria for hedge accounting and accumulated gains or losses relating to the hedge are in equity, these gains/losses remain in equity and are recognised as income simultaneous with the forecast transaction finally being reported in the Income Statement. When a forecast transaction is no longer expected to occur, the accumulated profit or loss reported in equity is immediately reported in the Income Statement.

Cash and cash equivalents

Cash and cash equivalents consist of cash funds and immediately available balances with banks and corresponding institutions.

Property, plant and equipment

Property, plant and equipment are reported in the group at cost less deductions for accumulated depreciation and potential impairment losses. The cost includes the purchase price and expenses directly attributable to bringing the asset into the location and condition for use pursuant to the purpose of its acquisition. The accounting principles for impairment losses are reported below. Property, plant and equipment that comprise components of differing useful lives are treated as separate components of property, plant and equipment.

The carrying amount of property, plant and equipment is removed from the Balance Sheet on disposal or divestment, or when no future economic benefits are expected from using or divesting/disposing of the asset. Profits or losses arising upon disposal or divestment of an asset comprise the difference between the sales price and the asset's carrying amount less direct selling expenses. Profits and losses are reported as other operating revenue/expenses.

Additional expenditure

Additional expenditure is added to cost only if it is likely that the future economic benefits associated with the asset will arise for the company, and the cost can be measured reliably. All other additional expenditure is reported as a cost in the period it occurs. Additional expenditure is added to cost to the extent that the performance of the asset is improved in relation to the level applying when originally acquired. All other additional expenditure is reported as a cost in the period it occurs. Whether expenditure relates to the exchange of identifiable components, or parts thereof, is decisive to evaluation of when additional expenditure is added to cost, whereupon such expenditure is capitalised. Even in those cases where new components are added, expenditure is added to cost. Potential carrying amounts not expensed on exchanged components, or parts of components, are made obsolete and expensed at exchange. Repairs are expensed on an ongoing basis.

Depreciation principles

Depreciation is on a straight-line basis over the estimated useful lives of assets. Land is not depreciated. The group utilises component depreciation, which means that the components' estimated useful lives are the basis for depreciation.

Estimated useful lives:

Land improvements	20 years
Buildings, real estate used in business operations	see below
Expenditure on other party's property—permanent equipment,
servicing facilities etc. in buildings	5 or 20 years
Expenditure on other party's property—permanent installation, buildings	20 years
Permanent equipment, servicing facilities etc. in buildings	see below
Plant and machinery	5 years
Equipment, tools fixtures and fittings	4 or 5 years

Real estate used in business operations comprises a number of components with differing useful lives. The main division is buildings and land. However, buildings comprise several components, whose useful lives vary. The useful lives of these components are assessed to vary between 10 and 100 years.

The following main groups of components have been identified and are the basis for depreciation on buildings:

Framework	100 years
Additions to framework, interior walls, etc.	20–40 years
Fixtures and fittings, heating, electricity, ventilation and sanitation, etc.	20–40 years
Exterior surfaces, frontage, external roofing, etc.	20–30 years

Interior surfaces, mechanical equipment, etc. 10–15 years

The depreciation methods applied and residual values and useful lives of assets are reevaluated at each year-end.

Intangible assets

Goodwill Goodwill is the difference between the cost of business acquisitions and the fair value of acquired assets, liabilities taken over and contingent liabilities. Goodwill is reported at cost less potential accumulated impairment losses. Goodwill acquired in a business combination is allocated between cash-generating units or groups of cash generating units that are expected to benefit from the synergies of the business combination. Goodwill is subject to impairment tests at least yearly.

Research and development

Expenditure for development, where research results or other knowledge are used to achieve new or improved products or processes, is reported as an asset in the Balance Sheet if the product or process is technically and commercially usable, and the company has sufficient resources to complete development, and will use or sell the intangible asset thereafter. The carrying amount includes expenditure for materials, direct expenditure for salaries and indirect expenditure attributable to the asset in a reasonable and consistent manner. Other expenditure for development is reported in the Income Statement as an expense when it occurs. Development expenses reported in the Balance Sheet are reported at cost less accumulated amortisation and potential impairment losses.

Other intangible assets

Other intangible assets acquired by the group are reported at cost less accumulated amortisation (see below). Expenses incurred for internally generated goodwill and internally generated trademarks and brands are reported in the Income Statement when the expense occurs.

Additional expenditure

Additional expenditure for capitalised intangible assets is reported as an asset in the Balance Sheet only when it increases the future economic benefits for the specific asset to which it is attributable. All other expenditure is expensed as it occurs.

Amortisation

Amortisation is reported in the Income Statement on a straight-line basis over the estimated useful lives of intangible assets, providing such useful lives are not indefinite. Goodwill is subject to impairment tests annually or as soon as indications that the relevant asset's value is impaired arise. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are:

Trademarks, brands and similar rights 5 years Capitalised expenditure on software 4 years

Capitalised expenditure for process development 5 years

Inventories

Inventories are reported at the lower of cost and net realisable value. Net realisable value is the estimated sales price in operating activities less estimated expenditure for completion and achieving a sale. Cost is calculated by applying the FIFO (first in first out) method and includes expenditure arising from the acquisition of inventory items and their transportation to their current location and condition. The cost of producing finished goods and work in progress includes a reasonable proportion of indirect expenses based on normal capacity utilisation. The cost of finished and semi-finished goods produced by the company includes direct production expenses and a reasonable proportion of indirect production expenses. Valuations consider normal capacity utilisation.

Inventories are reported net of deductions for individually judged risk of obsolescence.

Impairment

With the exception of inventories and deferred tax assets, the carrying amounts of the group's assets are subject to impairment tests at each reporting date. If there is such indication, the asset's recoverable value is calculated. Assets exempted by the above are subject to impairment tests pursuant to the relevant standards. An impairment loss is reported when an asset or cash-generating unit's carrying amount exceeds its recoverable value. An impairment loss is posted to the Income Statement. Impairment losses on assets attributable to cash-generating units (group of units) are primarily assigned to goodwill.

A proportional impairment loss of the unit's other constituent assets (group of units) is effected subsequently.

Calculating recoverable values

Recoverable values on accounts receivable—trade are calculated as the original receivable less the amounts not expected to be received. The recoverable value of other assets is measured as the greater of fair value less selling expenses and value in use.

Reversal of impairment losses

Impairment losses of accounts receivable—trade are reversed if a subsequent increase in recoverable value can be objectively attributed to an event that has occurred after the impairment loss was effected. Goodwill impairment losses are not reversed. Impairment losses on other assets are reversed if changes to the assumptions forming the basis for calculating the recoverable value have occurred. An impairment loss is only reversed to the extend the asset's carrying amount after reversal does not exceed the carrying amount the asset would have had if no impairment loss had been effected, considering the depreciation or amortisation that would then have been effected.

Share capital Dividends

Dividends are reported as a liability after the AGM has approved the dividends.

Employee benefits

Defined-contribution pension plans Commitments regarding expenditure on defined-contribution plans are reported as an

expense in the Income Statement when they occur.

Defined-benefit pension plans

The group has a traditional assurance defined-benefit plan. The net commitment is calculated through an estimate of the future remuneration employees have accrued through their service in current and previous periods. This remuneration is discounted to present value. The discount rate is set at expected future funding costs. The corridor rule applies. The corridor rule implies that the portion of the accrued actuarial gains and losses exceeding 10% of the commitment's present value is reported in profits over the expected average remaining length of service for those employees covered by the plan. Otherwise, actuarial gains and losses are not considered.

When there is a difference between how the pension expense is determined for a legal entity and a group, a provision or receivable relating to a liability for special employer's contribution based on this difference is reported. The present value of the provision or receivable is not calculated.

Remuneration on notice of termination

A cost for remuneration coincident with the notices of termination to staff is reported only if the company has demonstrably committed to terminate employment before the normal time, without the realistic possibility of withdrawing its decision, by a formal detailed plan. When remuneration is disbursed as an offering to encourage voluntary redundancies, a cost is reported if it is probable that the offer will be accepted and that the number of employees who will accept the offer can be reliably estimated.

Provisions

Provisions are reported in the Balance Sheet when the group has a commitment, and it is likely that an outflow of economic resources will be necessary to settle the commitment and the amount can be reliably measured.

Restructuring

A restructuring provision is reported when the group has determined an executable and formal restructuring plan, and the restructuring has either begun or been publicly disclosed.

Tax

Income tax comprises current tax and deferred tax. Income tax is reported in the Income Statement apart from when the underlying transaction is reported directly against equity, whereupon the associated tax effect is reported in equity.

Current tax is tax paid or received for the current year, applying the tax rates enacted or substantively enacted as of year-end, which also includes adjustments to current tax attributable to previous periods. Deferred tax is calculated according to the balance sheet method, proceeding from temporary differences between carrying amounts and taxable values of assets and liabilities. The following temporary differences are not considered; for temporary differences arising in the first-time accounting of goodwill, the first-time accounting of assets and liabilities that are not business combinations, and that at the time of the transaction neither influence reported nor taxable profits. Nor are temporary differences attributable to participations in subsidiaries not expected to be reversed within the foreseeable future considered.

The measurement of deferred tax is based on how the carrying amounts of assets or liabilities are expected to be realised or settled. Deferred tax is calculated by applying the tax rates and tax regulations that are enacted or substantively enacted at year-end.

Deferred tax assets on taxable temporary differences and loss carry-forwards are only reported to the extent it is likely that they will be utilised. The value of deferred tax assets is reduced when it is no longer considered likely that they can be utilised.

Earnings per share

The calculation of earnings per share is based on the consolidated profit for the group for the year and on the weighted average number of shares outstanding in the year. When calculating earnings per share after dilution, the average number of shares is adjusted to take into account effects of any diluting ordinary shares, which, in the relevant reporting period, derive from options issued to senior management.

Contingent liabilities

A contingent liability is reported when there is a possible commitment resulting from events that have occurred and whose incidence is only confirmed by one or more uncertain future events, or when there is a commitment that is not reported as a liability or provision because it is not likely that an outflow of resources will be necessary.

Note 2 Division of revenue

All group sales are derived from EMS operations, i.e. contract manufacture services for electronics products.

Note 3 Segment reporting

Significant key figures for NOTE's operating segments are in the following table, pursuant to the application of IFRS 8. Essentially, these consist of Nearsourcing centres and Industrial Plants. Nearsourcing centres are the selling units in Sweden, Norway, Finland and the UK, where development-oriented work is conducted close to customers. Industrial Plants are manufacturing units in Estonia, Lithuania, Poland and China. Other units consist of business-support, group-wide operations.

	2009	2008
NEARSOURCING CENTRES
External sales	1,173,244	1,678,201
Internal sales	93,017	93,011
Production, sales and administrative expenses	–385,893	–511,036
Depreciation and amortisation	–19,305	–19,431
Operating profit/loss	–46,713	33,103
Property, plant and equipment	57,109	75,487
Inventories	114,720	250,510
Total assets	564,911	711,254
Average number of employees	501	659
INDUSTRIAL PLANTS
External sales	26,468	31,207
Internal sales	366,548	315,379
Production, sales and administrative expenses	–112,192	–103,331
Depreciation and amortisation	–15,046	–11,514
Operating profit/loss	–18,938	–15,647
Property, plant and equipment	62,964	64,103
Inventories	103,116	92,308
Total assets	318,053	236,465
Average number of employees	460	516
OTHER UNITS AND ELIMINATIONS
External sales	351	42
Internal sales	–459,565	–408,390
Production, sales and administrative expenses	–19,006	–27,224
Depreciation and amortisation	–1,961	–1,307
Operating profit/loss	–25,146	–21,279
Property, plant and equipment	1,972	2,269
Inventories	51	80
Total assets	–129,912	571
Average number of employees	16	26
Operating profit/loss reconciled against profit/loss before tax	2009	2008
Operating profit/loss for segments for which information should be disclosed	–65,652	17,456
Operating profit/loss for other segments and eliminations	–25,146	–21,279
Financial income and expenses - net	–7,128	–10,563
Profit/loss before tax	–97,926	–14,386

NOTE's registered office is in Sweden. Net revenues from external customers in Sweden were SEK 727.5 (1,145.0) m, and from other countries SEK 472.6 (564.4) m. Non-current assets in Sweden (excluding eliminations) were SEK 421.2 (395.7) m as of the reporting date, and in other countries SEK 128.0 (93.1) m.

Note 4 Business combinations

2009

At year-end 2009, NOTE AB acquired 50% of the shares of IONOTE EMS Ltd., based in China. This company was previously operated as a joint venture with the partner Ionics EMS.

The acquired company's net assets (50%) at the acquisition date (preliminary acquisition analysis)

	Carrying amount in IONOTE before acquisition	Fair value adjust ment	Fair value reported in group
Property, plant and equipment	6,004	1,011	7,015
Financial assets	239	–	239
Inventories	6,462	–	6,462
Accounts receivable—trade and other receivables	23,072	–	23,072
Cash and bank balances	1,643	–	1,643
Deferred tax liability	–	–266	–266
Interest-bearing liabilities	–15,246	–	–15,246
Accounts payable—trade and other liabilities	–20,048	–	–20,048
Net identifiable assets and liabilities	2,126	745	2,871
Consolidated goodwill			3,607
Purchase price			6,478
Cash (acquired)			1,643
Net cash outflow			4,835

Consolidated goodwill includes the value of local market knowledge and geographical presence.

The acquisition did not affect consolidated profit/loss in 2009. If the acquisition of IONOTE had been conducted at the beginning of the financial year, consolidated net sales would have increased by approximately SEK 1.9 m and consolidated profit/loss before tax would have reduced by approximately SEK –3.4 m.

2008

NOTE AB's UK subsidiary acquired the operations of Proqual in February 2008.

The acquired business segment's net assets at the acquisition date

	Carrying amount in Proqual before acquisition	Fair value adjust ment	Fair value reported in group
Property, plant and equipment	543	–	543
Inventories	935	–	935
Accounts receivable—trade and other receivables	88	–	88
Accounts payable—trade and other liabilities	–1,411	–	–1,411
Net identifiable assets and liabilities	155	–	155
Consolidated goodwill			2,927
Net cash outflow/purchase price			3,082
– of which transaction costs paid			556

Consolidated goodwill includes the value of customer relations and market position.

In April 2008, NOTE AB acquired all the shares of Kjell Tengmo AB, a mechanical engineering enterprise IN Järfälla, near Stockholm. This company's corporate name was changed to NOTE Components Järfälla AB.

The acquired company's net assets at the acquisition date

	Carrying amount in NCO Järfälla before acquisition	Fair value adjust ment	Fair value reported in group
Intangible assets	3,453	–	3,453
Property, plant and equipment	960	–	960
Deferred tax asset	–	77	77
Inventories	3,467	–	3,467
Accounts receivable—trade and other receivables	1,443	–	1,443
Interest-bearing liabilities	–201	–	–201
Accounts payable—trade and other liabilities	–9,297	–	–9,297
Net identifiable assets and liabilities	–175	77	–98
Consolidated goodwill			198
Net cash outflow/purchase price			100

The value of customer relations and supplementation of NOTE's customer offering is

included in goodwill. The acquisition affected consolidated net sales by SEK 22.0 m and profit/loss before tax by SEK –1.1 m. If the acquisition of NCO Järfälla had been conducted at the beginning of financial year, consolidated net sales would have increased by approximately SEK 1.1 m

and consolidated profit/loss before tax would have reduced by approximately SEK –0.3 m. In December 2008, NOTE AB's Norwegian subsidiary acquired all the shares of Norteam Electronics AS, an electronics manufacturer addressing services early in product lifecycles, based in Oslo.

The acquired company's net assets at the acquisition date

	Carrying amount in Norteam before	Fair value adjust	Fair value reported in
Property, plant and equipment	acquisition 1,641	ment 1,315	group 2,956
Deferred tax asset	2,315	–	2,315
Inventories	7,522	116	7,638
Accounts receivable—trade and other receivables	6,668	–	6,668
Cash and bank balances	776	–	776
Interest-bearing liabilities	–3,951	–	–3,951
Accounts payable—trade and other liabilities	–12,387	–	–12,387
Deferred tax liability	–	–376	–376
Net identifiable assets and liabilities	2,584	1,055	3,639
Consolidated goodwill			2,894
Purchase price			6,533
Cash (acquired)			776
Net cash outflow			5,757

Consolidated goodwill includes the value of customer relations and market position. The acquisition did not affect profit/loss in 2008, if the acquisition of Norteam had been conducted at the beginning of the financial year, consolidated net sales would have increased by approximately SEK 62.8 m and consolidated profits/loss before tax would have reduced by approximately SEK –5.4 m.

Other investments

In 2008, additional purchase price relating to participations of IONOTE of SEK 7.2 m were paid, and final proceeds regarding the acquisition of NOTE Hyvinkää/NOTE Pärnu of SEK 1.7 m were paid.

Note 5 Other operating revenue

	2009	2008
Exchange gains on trade receivables/liabilities	35,824	25,333
Other	2,309	475
	38,133	25,808

Note 6 Other operating expenses

	2009	2008
Exchange losses on trade receivables/liabilities	–41,305	–20,204
Other	–1,075	34
	–42,380	–20,170

Note 7 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits

	2009	2008
Salaries and benefits	–232,283	–294,151
Pension expenses, defined-benefit plans (more information in note 21)	–836	–998
Pension expenses, defined-contribution plans	–18,028	–18,759
Social security contributions	–64,204	–90,140
	–315,351	–404,048

Restructuring costs

Salaries and benefits include restructuring costs of SEK –(34.2) m for NOTE's current restructuring package and provisioning for the resigning CEO of SEK 8.8 m (–) m.

Average number of employees

		Of which		Of which
	2009	men	2008	men
Sweden	406	66%	600	64%
Norway	50	67%	21	61%
UK	30	60%	34	52%
Finland	30	80%	32	48%
Estonia	229	28%	264	31%
China	12	43%	3	33%
Poland	118	56%	89	56%
Lithuania	102	30%	158	24%
Group total	977	52%	1,201	50%

Division between sexes in group management

	2009 Share of women	2008 Share of women
Board members, Presidents	4%	4%
Other senior management, 5 (4) people	0%	25%

Senior management's remuneration

Remuneration and other benefits, 2009		Basic salary, Directors' fees	Performance related pay	Other benefits	Pension expense	Total
Chairman of the Board:	Bruce Grant	220	–	–	–	220
Board members:	Kjell Åke Andersson, resigned 21 Apr. 09	33	–	–	–	33
	Bo Andersson, elected 21 Apr. 09	67	–	–	–	67
	Håkan Gellerstedt	100	–	–	–	100
	Göran Gezelius, elected 21 Apr. 09	67	–	–	–	67
	Göran Jansson	190	–	–	–	190
	Hans Johansson, resigned 21 Apr. 09	33	–	–	–	33
	Per-Arne Sandström	100	–	–	–	100
	Göran Sigfridsson, elected 21 Apr. 09	67	–	–	–	67
CEO:	Arne Forslund, resigned 3 Jun. 09	2,000	–	357	807	3,164
	Knut Pogost, took up position 3 Jun. 09	1,992	–	–	–	1,992
Other senior management (5 people)		5,329	–	226	1,172	6,727
		10,198	–	583	1,979	12,760

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit/loss for 2009 apart from for the departing CEO Arne Forslund, where remuneration paid is reported. Un-paid remuneration to the departing CEO Arne Forslund was SEK 4.7 m at year-end, of which SEK 1.3 m was benefits and pensions. Consulting fees for senior management not employed by the group are in the other senior management line. The Report of the Directors states details of guidelines for remunerating senior management.

	Senior management's remuneration
--	----------------------------------	--

Remuneration and other benefits 2008		Basic salary, Directors' fees	Performance related pay	Other benefits	Pension expense	Total
Chairman of the Board:	Bruce Grant	217	–	–	–	217
Board members:	Kjell Åke Andersson	100	–	–	–	100
	Håkan Gellerstedt	100	–	–	–	100
	Göran Jansson	173	–	–	–	173
	Hans Johansson	100	–	–	–	100
	Per-Arne Sandström	100	–	–	–	100
CEO:	Arne Forslund	1,876	–	305	1,050	3,231
Other senior management (4 people)		6,485	–	381	1,142	8,008
		9,151	–	686	2,192	12,029

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profits for 2008. Consulting fees for senior management not employed by the group are in the other senior management line. The Report of the Directors states details of guidelines for remunerating senior management.

Note 8 Auditors' fees and reimbursement

	2009	2008
PwC
Auditing assignments	–1,240	–945
Other assignments	–82	–248
Other Auditors
Auditing assignments	–535	–509
Other assignments	–721	–429

Auditing assignments means auditing the annual accounts and accounting records and the Board of Directors' and President's administration, other tasks incumbent on the company's auditors and advisory or other services resulting from observations from such audit, or the performance of other similar duties. Everything else is classified as other assignments.

Note 9 Operating expenses by type

	2009	2008
Cost of goods and material	–717,499	–1,047,195
Personnel expenses	–315,351	–404,048
Depreciation and amortisation	–36,312	–32,252
Other	–259,831	–255,586
	–1,328,993	–1,739,081

Note 10 Net financial income/expense

	2009	2008
Interest income on bank balances	1,821	307
Exchange rate gains	–	1,943
Other	–8	25
Financial income	1,813	2,275
Interest costs on financial liabilities measured at amortised cost	–6,690	–12,116
Bank charges	–1,221	–109
Exchange rate losses	–	–532
Other	–1,030	–81
Financial expenses	–8,941	–12,838
Net financial income/expense	–7,128	–10,563

Note 11 Tax

Reported in Income Statement	2009	2008	Reconciliation of effective tax	%	2009	%	2008
Current tax expense (–)/tax revenue (+)			Profit/loss before tax		–97,926		–14,386
Tax expense for the period	–2,514	–14,283	Tax at applicable rate for parent company	26.3	25,755	28.0	4,028
Adjustment of tax attributable to previous year	–1,728	105	Effects of other tax rates for foreign subsidiaries	–0.2	–254	–13.4	–1,925
			Non-deductible expenses	–1.1	–1,080	–9.8	–1,403
Deferred tax expense (–)/tax revenue (+)			Non-taxable revenue	2.5	2,477	3.4	491
Deferred tax relating to temporary differences/appropriations	14,675	8,731	Tax attributable to previous year	–1.8	–1,728	0.7	105
Deferred tax revenue/expense in capitalised/utilised tax value			Un-reported tax revenue on loss for the year	–8.1	–7,914	–	–
in loss carry-forward	6,473	6,322	Standard interest on tax allocation reserve	–0.3	–301	–3.0	–429
Effect of change in Swedish tax rate	–	375	Effect of change in Swedish tax rate	–	–	2.6	375
Total reported tax in group	16,906	1,250	Other	–0.0	–49	0.2	8
					17.3 16,906	8.7	1,250

	Deferred tax asset		Deferred tax liability		Net
Reported in Balance Sheet	31 Dec 2009	31 Dec 2008		31 Dec 2009	31 Dec 2008		31 Dec 2009	31 Dec 2008
Property, plant and equipment	–	80		3,270	3,089		–3,270	–3,009
Pension provisions	393	393		320	330		73	63
Assets measured at fair value	–	–		–	269		–	–269
Loss carry-forwards	17,667	9,868		–	–		17,667	9,868
Un-taxed reserves	–	–		–	15,893		–	–15,893
Provisions	10,350	13,651		–	–		10,350	13,651
Tax receivables/liabilities	28,410	23,992		3,590	19,581		24,820	4,411
Set-off	–	–		–	–		–	–
Tax receivables/liabilities, net	28,410	23,992		3,590	19,581		24,820	4,411

Other provisions for tax	31 Dec 2009	31 Dec 2008
Carrying amount at beginning of period	19,581	19,991
Amounts provisioned in the period	322	5,209
Amounts utilised in the period	–16,313	–5,619
	3,590	19,581

Unreported deferred tax assets

Deductible temporary differences and tax loss carry-forwards for which deferred tax assets have not been reported in the Income Statement and Balance Sheet amounted to SEK 30.7 (–) m.

Change in deferred tax in temporary differences and loss carry-forwards

	Balance as of 1 Jan 2008	Reported in Income Statement	Reported against equity	Acquisition/divest ment of operation	Balance as of 31 Dec 2008
Property, plant and equipment	–2,530	–102	–	–377	–3,009
Pension provisions	–191	254	–	–	63
Appropriations	–16,674	781	–	–	–15,893
Assets measured at fair value	–	–269	–	–	–269
Loss carry-forward	3,911	6,295	–338	–	9,868
Provisions	2,867	8,469	–	2,315	13,651
	–12,617	15,428	–338	1,938	4,411

	Balance as of 1 Jan 2009	Reported in Income Statement	Reported against equity	Acquisition/divest ment of operation	Balance as of 31 Dec 2009
Property, plant and equipment	–3,009	–6	11	–266	–3,270
Pension provisions	63	10	–	–	73
Appropriations	–15,893	15,893	–	–	–
Assets measured at fair value	–269	269	–	–	–
Loss carry-forward	9,868	6,473	1,326	–	17,667
Provisions	13,651	–1,491	–1,810	–	10,350
	4,411	21,148	–473	–266	24,820

Note 12 Intangible assets

The useful life of goodwill is indeterminable while the useful lives of other intangible assets is determinable and conforms to what is stated in note 1, Accounting principles. Intangible assets with determinable useful lives are amortised on a straight-line basis over their useful lives.

		Capitalised expenditure	Trademarks and brands
	Goodwill, acquired	for software, acquired	etc., acquired	Total
Cumulative cost
Opening balance, 1 Jan 2008	59,575	3,366	988	63,929
Business combinations	9,786	–	–	9,786
Reclassification and exchange rate effects	–322	–174	190	–306
Other investments	–	8,648	279	8,927
Divestments and disposals	–	–3	–	–3
Closing balance, 31 Dec 2008	69,039	11,837	1,457	82,333
Opening balance, 1 Jan 2009	69,039	11,837	1,457	82,333
Business combinations	3,607	–	–	3,607
Reclassification and exchange rate effects	493	–84	–77	332
Other investments	–	4,423	–	4,423
Divestments and disposals	–	–3	–	–3
Closing balance, 31 Dec 2009	73,139	16,173	1,380	90,692
Accumulated amortisation and impairment
Opening balance, 1 Jan 2008	–1,880	–841	–740	–3,461
Reclassification and exchange rate effects	–44	–417	–146	–607
Impairment for the year	–	–	–	–
Amortisation for the year	–	–1,632	–279	–1,911
Divestments and disposals	–	3	–	3
Closing balance, 31 Dec 2008	–1,924	–2,887	–1,165	–5,976
Opening balance, 1 Jan 2009	–1,924	–2,887	–1,165	–5,976
Reclassification and exchange rate effects	–	17	63	80
Impairment for the year	–	–	–	–
Amortisation for the year	–	–3,256	–78	–3,334
Divestments and disposals	–	3	–	3
Closing balance, 31 Dec 2009	–1,924	–6,123	–1,180	–9,227
Carrying amounts
As of 1 Jan 2008	57,695	2,525	248	60,468
As of 31 Dec 2008	67,115	8,950	292	76,357
As of 1 Jan 2009	67,115	8,950	292	76,357
As of 31 Dec 2009	71,215	10,050	200	81,465

Amortisation and impairment

Amortisation is included in the following Income Statement lines	2009	2008
Cost of goods sold and services	–3,326	–1,900
Administrative expenses	–8	–8
Selling expenses	–	–3
	–3,334	–1,911

Impairment losses

There were no significant impairment losses in the year.

Impairment test of goodwill

The following cash-generating units have significant reported goodwill values in relation to the group's total reported goodwill values:

31 Dec 2009	31 Dec 2008
19,904	19,904
12,175	8,568
11,319	11,319
8,740	8,740
6,833	6,833
5,677	5,284
3,651	3,606
2,661	2,606
70,960	66,860
255	255
71,215	67,115

All units

The recoverable value of units is based on the same basic assumptions. Impairment tests for all units are based on calculations of value in use, a value based on cash flow forecasts totalling 10 years, based on forecasts made by NOTE. The present value of forecast cash flows has been calculated with a discount rate based on risk-free interest and the risk associated with operations. NOTE mainly has a joint funding facility. Accordingly, the same discount rate, 12%, has been used for all units:

Important variables	Method for estimating values
Market share and growth	Market growth has been estimated at 5% for 2010–2019. Two units have higher growth because these operations are in a build-up phase.
Component prices	Component prices are expected to fall mainly because of increased procurement volumes and more efficient procure ment.
Personnel expenses	Payroll overheads are estimated partly using collective agree ments and partly historical pay increases. Additionally, in creased payroll overheads resulting from growth in the group's facilities in low-cost countries have also been calculated.

Recoverable values for all units exceed carrying amount.

Goodwill impairment tests

Several assumptions regarding future circumstances and estimates of parameters were made when calculating the recoverable value of cash-generating units for evaluating the potential need for goodwill impairment.

Sensitivity analysis of goodwill impairment test

With the calculation conditions stated above and considering NOTE's estimated growth and profitability potential of its new Nearsourcing business model, there is a satisfactory margin above impairment of goodwill values.

Note 13 Property, plant and equipment

	Buildings and land (real estate used in business operations)	Costs incurred on other party's property	Machinery and other plant	Equipment, tools, fixtures and fittings	Total
Cost
Opening balance, 1 Jan 2008	66,800	2,591	172,989	46,619	288,999
Business combinations	–	109	3,275	1,075	4,459
Other investments	–	4,074	29,071	7,045	40,190
Divestments	–	–	–23,402	–292	–23,694
Reclassification and exchange rate effects	4,674	158	–1,505	6,785	10,112
Closing balance, 31 Dec 2008	71,474	6,932	180,428	61,232	320,066
Opening balance, 1 Jan 2009	71,474	6,932	180,428	61,232	320,066
Business combinations	–	691	5,787	537	7,015
Other investments	–	357	10,057	2,183	12,597
Divestments	–	–	–10,476	–8,114	–18,590
Reclassification and exchange rate effects	–1,832	50	–2,485	–162	–4,429
Closing balance, 31 Dec 2009	69,642	8,030	183,311	55,676	316,659
Depreciation and impairment
Opening balance, 1 Jan 2008	–19,143	–154	–101,392	–37,145	–157,834
Depreciation for the year	–1,693	–706	–23,123	–4,774	–30,296
Divestments	–	–	16,100	159	16,259
Reclassification and exchange rate effects	–1,411	–131	2,236	–7,030	–6,336
Closing balance, 31 Dec 2008	–22,247	–991	–106,179	–48,790	–178,207
Opening balance, 1 Jan 2009	–22,247	–991	–106,179	–48,790	–178,207
Depreciation for the year	–2,542	–1,640	–23,893	–4,903	–32,978
Divestments	–	–	6,452	7,733	14,185
Reclassification and exchange rate effects	599	–16	1,872	–69	2,386
Closing balance, 31 Dec 2009	–24,190	–2,647	–121,748	–46,029	–194,614
Carrying amounts
As of 1 Jan 2008	47,657	2,437	71,597	9,474	131,165
As of 31 Dec 2008	49,227	5,941	74,249	12,442	141,859
As of 1 Jan 2009	49,227	5,941	74,249	12,442	141,859
As of 31 Dec 2009	45,452	5,383	61,563	9,647	122,045

Taxable values

	31 Dec 2009	31 Dec 2008
Taxable values, buildings in Sweden	14,556	14,556
Taxable values, land in Sweden	5,231	5,231

Information on central government support in the group

The aggregate cost of the assets the support is intended to cover amounted to 933 in the period. The cost reduced by 140 for enacted government support. Total utilised, but not received, investment subsidies amount to 317 (177) on the reporting date. Pledged assets for subsidies received in 2009 and the previous year amounted to 8,050, with repayment obligation for investment support in the event of the specified terms not being satisfied.

Depreciation and impairment

Depreciation is included in the following

Income Statement lines	2009	2008
Cost of goods sold and services	–29,749	–27,347
Administrative expenses	–2,931	–1,195
Selling expenses	–298	–1,754
	–32,978	–30,296

Finance leases (leased production equipment)

The group leases production equipment through several different finance lease arrangements. As of 31 December 2009, the value of leased assets was 27,441 (43,668).

Collateral

As of 31 December 2009, property with a carrying amount of 45,452 (49,227) was pledged as collateral for bank borrowings.

Note 14 Participations in joint ventures

The group has a 50% holding in joint venture NOTEFideltronik SA, whose main business is the contract manufacture of electronics. at year-end 2009, 50% of former joint venture IONOTE EMS Ltd. was acquired, which means that IONOTE is only included in revenue and expenses below. For 2008, IONOTE is included in the Income Statement and Balance Sheet. The following items, which are the group's participating interest in the joint venture's assets, liabilities, revenue and expenses are included in the consolidated financial statements.

	2009	2008
Revenue	56,439	26,392
Expenses	–63,882	–34,244
Profit/loss	–7,443	–7,852
Non-current assets	7,220	8,931
Current assets	21,092	40,204
Total assets	28,312	49,135
Non-current liabilities	–	4,608
Current liabilities	14,029	20,768
Total liabilities	14,029	25,376
Net assets/net liabilities	14,283	23,759

Note 15 Long-term receivables and other receivables

	31 Dec 2009	31 Dec 2008
Long-term receivables
Receivables from joint ventures	–	4,555
Other long-term receivables	2,621	294
	2,621	4,849
Other receivables that are current assets
VAT	16,623	11,792
Loans	–	7,481
Fair value, derivatives	–	1,335
Other	6,154	6,389
	22,777	26,997

Note 16 Inventories

	31 Dec 2009	31 Dec 2008
Raw materials and consumables	201,351	250,620
Products in process	42,170	74,396
Finished goods and goods for re-sale	9,975	42,965
Obsolescence provision	–35,609	–25,083
	217,887	342,898

Note 17 Prepaid expenses and accrued income

	31 Dec 2009	31 Dec 2008
Accrued income	4,061	5,795
Prepaid rent	3,010	2,809
Prepaid licences	1,678	897
Prepaid insurance	592	1,423
Prepaid lease payments	490	805
Other prepaid expenses	3,500	2,304
	13,331	14,033

Note 18 Equity

Group	Share class A
Share capital (thousands of shares)	31 Dec 2009	31 Dec 2008
Issued as of 1 January	9 624	9 624
Issued as of 31 December—paid up	9 624	9 624

As of 31 December 2009, registered share capital comprised 9,624,200 shares with a quotient value of SEK 0.50. There were no outstanding warrants or other instruments that could result in dilution effects as of 31 December 2009. Shareholders are entitled to dividends, and shareholdings confer the voting rights of one vote per share at the AGM.

Other paid-up capital

Equity contributed by shareholders. This includes the portion of the share premium reserve transferred to the statutory reserve as of 31 December 2005.

Reserves

Translation reserve	31 Dec 2009	31 Dec 2008
Opening translation reserve	9,459	2,515
Translation differences for the year	–3,673	6,944
Closing translation reserve	5,786	9,459

The translation reserve includes all exchange rate differences arising from translating financial statements from foreign operations that prepared their financial statements in currencies other than the currency the consolidated financial statements are presented in. The parent company and group present their financial statements in Swedish kronor. The translation reserve also includes the effect of exchange rate differences on internal loans.

Hedging reserve	31 Dec 2009	31 Dec 2008
Opening hedging reserve	313	–
Forecast cash flow hedges for the year	–313	313
Closing hedging reserve	–	313

The hedging reserve includes partly the cash flow hedges whose effectiveness is partly tested pursuant to IAS 39 and partly relates to the forecast flows that have not yet affected the Consolidated Income Statement and Consolidated Balance Sheet.

Retained profit including profit/loss for the period

Retained profits including profit/loss for the period include accrued profits of the parent company and its subsidiaries and joint venture companies. Previous provisions to statutory reserves, excluding transfers to share premium reserve are included in retained profit including profit/loss for the year.

Capital management

The Board of Directors and management of NOTE have set the following financial goals:

Growth goal

NOTE will increase its market share organically and through acquisitions.

Profitability goal

NOTE will grow with profitability. The objective is for a minimum return on operating capital of 20%. For the long term and over a business cycle, profitability should also exceed the average of other medium-sized international EMS providers.

Capital structure goal

The minimum equity to assets ratio is 30%. At year-end, the equity to assets ratio was 27.9 (31.1)%.

Through its external borrowings, the company is subject to covenants. For more information on covenants, please refer to note 26, Financial risks and finance policy.

Dividend

No dividend was paid in the year. The Board of Directors proposes to the AGM that no dividends are paid for 2009. These dividends will be subject to approval at the AGM on 27 April 2010.

The Board of Directors' dividend goal is that dividends should be adapted to average profit levels over a business cycle, and be 30–50% of profit after tax for the long term. Dividends should also be available to adapt the capital structure.

Note 19 Earnings per share

Earnings per share	Before dilution		After dilution
	2009	2008	2009	2008
Earnings per share, SEK	–8.42	–1.36	–8.42	–1.36

The calculation of earnings per share for 2009 has been based on profit/ loss for the period of SEK –81,019 (–13,136) and on a weighted average number of outstanding shares in 2009 of 9,624,200 (9,624,200).

Earnings per share after dilution

There is no dilution effect because NOTE has not issued any instruments that could cause dilution.

Note 20 Interest-bearing liabilities

	31 Dec 2009	31 Dec 2008
Non-current liabilities
Bank loans	–	34,997
Finance lease liabilities, machinery	13,977	27,076
	13,977	62,073
Current liabilities
Overdraft facility	68,410	103,455
Factoring	136,281	–
Short-term portion of bank loans	–	88,998
Short-term portion of finance lease liabilities	13,464	16,592
Other loans	19,407	4
	237,562	209,049

Pledged assets

27,571 (29,843) of collateral for interest-bearing liabilities is pledged in the company's land and buildings, 189,441 (–) in factored accounts receivable—trade and 261,581 (253,842) in operations (see also note 13).

Finance lease liabilities

Finance lease liabilities are due for payment as follows:

	Minimum lease pay ments 2009	Interest 2009	Princi pal 2009	Minimum lease pay ments 2008	Interest 2008	Princi pal 2008
Within one year	13,464	2,154	11,310	16,592	2,489	14,103
Between one and five years	13,977	2,236	11,741	27,076	4,061	23,015
	27,441		4,390 23,051	43,668	6,550	37,118

For more information, see note 26 Financial risks and finance policy on page 51.

Note 21 Pension commitments

Defined-benefit pension plans	31 Dec 2009	31 Dec 2008
Present value of traditional assurance commitments	15,658	14,768
Un-reported actuarial losses	–2,910	–2,807
Pension provisions	12,748	11,961
Changes to the commitment for defined-benefit plans reported in the Balance Sheet	2009	2008
Commitment for defined-benefit plans as of 1 January	11,961	10,963
Cost of employment in the current period and interest expense (see below)	836	998
Pension payments	–49	–
Commitment for defined-benefit plans as of 31 December	12,748	11,961
Expense reported in Income Statement	2009	2008
Cost related to employment in the current period	128	162
Interest expense on commitment	623	694
Actuarial losses(+)/gains(–)	85	142
Total net expense in Income Statement	836	998
The measured expense for 2010 amounts to 753 (790)
Expense reported in the following Income Statement lines	2009	2008

			677
			1,203
			–882
			998
2009	2008	2007	2006
15,658	14,768	14,636	11,191
			209 376 251 836

Experience-based adjustment loss –/gain + –2,910 –2,398 –1,291 –543

Assumptions for defined-benefit commitments

The main actuarial assumptions as of the reporting date (weighted averages)

	31 Dec 2009	31 Dec 2008
Discount rate as of 31 December, %	4.0	4.0
Salary increase, %	3.5	3.5
Income basic amount, %	3.5	3.5
Staff turnover, %	7.1	7.1
Inflation, %	2.0	2.0
Remaining length of service, years	14.1	17.0

The commitments for retirement and survivors' pensions for salaried employees in Sweden are largely insured through a policy with Alecta. Statement URA 42 from RR's Emerging Issues Taskforce defines this as a defined-benefit multi-employer plan. For the financial year 2009, the company did not have access to sufficient information enabling the plan to be reported as a defined-benefit plan. Thus, ITP (Supplementary Pensions for Salaried Employees) plans insured through Alecta are reported as defined-contribution plans. The expenditure for pension policies with Alecta in the year were SEK 4.5 (3.8) m. Alecta's surplus can be divided between policy-holders and/or beneficiaries. At year-end 2009, Alecta's surplus, expressed as a collective consolidation ratio was 141 (112)%. This collective consolidation ratio comprises the market value of Alecta's assets as a percentage of insurance commitments calculated pursuant to Alecta's actuarial calculation assumptions, which are not consistent with IAS 19.

Defined-contribution pension plans

The group has defined-contribution pension plans in Sweden for white-collar and blue-collar staff, which the companies fund fully. There are defined-contribution plans in foreign countries, which are partly paid by subsidiaries and partly covered through employees' contributions. Payments to these plans is on an ongoing basis subject to the regulations of each plan.

	2009	2008
Expenses for defined-contribution plans 1	16,808	18,008

1 Includes 4,514 (3,796) for an ITP plan insured with Alecta, see above.

Note 22 Provisions

Long-term portion of provisions	31 Dec 2009	31 Dec 2008
Pensions	12,748	11,961
Other	153	128
	12,901	12,089
Short-term portion of provisions	31 Dec 2009	31 Dec 2008
Expenses for restructuring measures	32,135	39,618
Other	6,163	1,622

Expenses for restructuring measures:

In December 2008, NOTE decided on staff reductions involving over 100 employees mainly in its Swedish operation. The restructuring took longer than planned, but the majority of the provision was consumed in 2009.

The provision for restructuring measures on 31 December 2009 essentially consisted of estimated costs for personnel and discontinued operations, and the majority is expected to be consumed in the first half-year 2010.

		Additional
2008	Restructuring	purchase price	Pensions	Other	Total
Carrying amount at beginning of period	200	9,001	10,963	3,800	23,964
Provisions in the period	33,971	–	998	50	35,019
Acquired subsidiaries	5,647	–	–	–	5,647
Amounts utilised in the period	–	–8,569	–	–	–8,569
Un-utilised amounts reversed in the period	–200	–432	–	–2,100	–2,732
Carrying amount at end of period	39,618	–	11,961	1,750	53,329

38,298 41,240

		Additional
2009	Restructuring	purchase price	Pensions	Other	Total
Carrying amount at beginning of period	39,618	–	11,961	1,750	53,329
Provisions in the period	38,515	–	836	8,839	48,190
Amounts utilised in the period	–28,169	–	–49	–4,272	–32,490
Un-utilised amounts reversed in the period	–17,830	–	–	–	–17,830
Carrying amount at end of period	32,134	–	12,748	6,317	51,199

Note 23 Other current liabilities

	31 Dec 2009	31 Dec 2008
Staff withholding tax	8,520	7,461
Social security contributions	5,613	4,366
VAT	13,838	16,220
Other	7,643	2,428
	35,614	30,475

Note 24 Accrued expenses and deferred income

	31 Dec 2009	31 Dec 2008
Accrued salaries and benefits	10,332	10,072
Accrued social security contributions	8,008	13,802
Payment for vacation taken in cash	20,488	28,199
Other	7,939	10,694
	46,767	62,767

Note 25 Financial assets and liabilities

Fair value

The methods and assumptions primarily used to determine fair value are summarised below. Consolidated financial assets and liabilities are classified into the following categories.

Derivative instruments

The fair value of currency contracts is measured from prices on the reporting date from an independent source.

Accounts receivable—trade and accounts payable—trade

For accounts receivable—trade and accounts payable—trade with remaining terms of less than six months, the carrying amount is considered to reflect fair value. There are no significant accounts receivable—trade and accounts payable—trade with terms of over six months.

Interest-bearing liabilities

The fair value of financial liabilities that are not derivative instruments is measured based on future cash flows of principals and interest discounted to current market rates of interest on the reporting date.

Note 26 Financial risks and finance policy

Through its operations, the group is exposed to various types of financial risk such as currency risks, funding and interest risks and liquidity and credit risks. The group's finance policy stipulates that financial risks are to be kept at the lowest possible level.

The group's finance policy for managing financial risk has been formulated by the Board and constitutes a framework for risk management. The policy's overall goal is to ensure the company's long and short-term access to capital, to adapt the financial strategy to the company's operations to enable the attainment and retention of a stable long-term capital structure, and to achieve the best possible financial income/expenses within stated risk limits.

The group's guidelines for loan financing state that there should be one main lender. The policy stipulates the consistent allocation of maturities over the years.

The parent company is primarily focused on the management, coordination and development of the group, as well as group reporting and communication with shareholders. The group's operations are pursued in legal subsidiaries, and accordingly, the actual risks occur there.

Agreement terms

Financial assets mainly consist of cash and cash equivalents and accounts receivable trade. The risk associated with accounts receivable—trade increases with the number of outstanding days of credit. There is a market tendency to require longer credit terms.

NOTE arranged a new funding facility with its bank connection in the first quarter. The new funding facility is a combination of debt factoring and traditional overdraft facilities. As planned, this new solution became effective early in the second quarter, when factoring credits were successively built up and replaced previous loans. As a consequence of the new funding facility, pledged factoring credits were some SEK 189 m at year-end.

The interest terms on the factoring and overdraft facilities are based on a variable base rate plus fixed percentage interest rates. NOTE has agreed on a number of covenants to its lender as security for the liabilities.

Liquidity risks

Liquidity risk means the risk of being unable to fulfil payment commitments resulting from insufficient liquidity or difficulties in raising external borrowings. Operations are funded through means such as SEK 209.9 m of equity and interest-bearing liabilities of SEK 251.5 m, utilised overdrafts of SEK 68.4 m. The un-utilised overdraft facility was SEK 26.3 m at year-end. Financial liabilities comprise external borrowing and the utilised portion of the overdraft and factoring facilities.

To also be financially secure for the continued structural transformation end to exploit business opportunities on the market, in tandem with the financial statement for 2009, the Board reported its intention to propose a new share issue. The proposed new share issue is for current shareholders and amounts to some SEK 87 m.

Age analysis, financial liabilities

2009, SEK m	Total	Within 1 mth.	1–3 mth.	3 mth.– 1 yr.	1–5 yr.	5 yr. and longer
Bank credit facilities including overdraft &
factoring	204.7	–	–	204.7	–	–
Finance lease liabilities	27.4	1.7	2.6	9.1	14.0	–
Accounts payable—trade	153.9	123.5	24.4	6.0	–	–
Other financial liabilities	19.5	–	–	19.5	–	–
Total	405.5	125.2	27.0	239.3	14.0	–
		Within	1–3	3 mth.–		5 yr. and
2008, SEK m	Total	1 mth.	mth.	1 yr.	1–5 yr.	longer
Bank loans	227.5	0.0	9.5	183.0	35.0	–
Finance lease liabilities	43.7	0.4	0.8	15.4	27.1	–
Accounts payable—trade	208.6	109.0	89.6	10.0	–	–
Total	479.8	109.4	99.9	208.4	62.1	–

Interest risks

Interest risk is the risk that the value of a financial instrument varies due to changes in interest rates. Interest risks can partly comprise changes in fair value, price risk, and partly changes in cash flow, cash flow risk. Interest fixing periods are a significant factor influencing interest risk. Longer interest fixing periods mainly affect cash flow risk, while shorter interest fixing periods affect price risk. The management of the group's interest exposure is centralised, implying that the central finance function is responsible for identifying and managing this exposure. The group's exposure to market risk for changes in interest levels is mainly attributable to the group's financial net debt.

Credit risks

Credit risks in financing activities

Credit risk consists of a party of the transaction being unable to fulfil its financial commitments. The group has no major financial assets.

Credit risks in accounts receivable—trade

The risk that the group's customers do not fulfil their commitments, i.e. that payments for accounts receivable—trade are not received, is a credit risk. The group's customers are subject to credit checks, implying the collection of information on customers' financial positions from various credit agencies. The group has prepared rules stating the level of decisions for credit limits, and how valuations of credits and doubtful debts should be managed. In some cases, for larger accounts receivable—trade, the risk of bad debt is limited through credit insurance. Bank guarantees or other collateral are required for customers with low creditworthiness or insufficient credit histories.

The ten biggest customers provide approximately 51% of sales. The group has a relatively good diversification of customers across a range of industrial sectors.

Age analysis, accounts receivable—trade	2009	2008
Not overdue accounts receivable—trade	198,308	217,855
Overdue accounts receivable—trade 0–30 days	26,694	45,948
Overdue accounts receivable—trade >30 days–60 days	1,584	5,227
Overdue accounts receivable—trade >60 days	7,560	10,580
Impaired accounts receivable—trade	–2,275	–6,924
Total	231,871	272,686

Currency risks

The group is exposed to various types of currency risk. The primary exposure is for purchases and sales in foreign currency, where risks can partly comprise fluctuations in the currency of the financial instrument, customer or supplier's invoice, partly the currency risk in expected or contracted payment flows, termed transaction exposure.

Currency risk fluctuations also exist in the conversion of foreign subsidiaries' assets and liabilities to the functional currency of the parent company, termed translation exposure. Foreign currency expenses and purchases are largely hedged through binding contracts, where the customer assumes the full currency risk. Invoicing is largely in local currency and the majority is denominated in Swedish kronor. If invoicing in local currency is not possible, hedging is arranged on contracts larger than a value of SEK 5 m. NOTE adopts a centralised view of managing currency hedges. NOTE's central accounting function hedges net flows in foreign currency on rolling six-month forecasts, based on the limits stipulated in NOTE's finance policy.

Transaction exposure

The group's currency risk is fairly limited by the majority of the group's invoicing being in Swedish kronor. The group classifies its forwards contracts used for hedging forecast transactions as cash flow hedging. At year-end, the fair value of NOTE's cash flow hedges was SEK – (0.3) m.

Assets and liabilities measured at fair value

NOTE's derivative instruments held for hedge accounting are based on valuation tier 2 of IFRS 7, i.e. fair value is based on observable data from an independent source. As of the reporting date 31 December 2009, there were no derivatives measured at fair value.

Materials risks

Because a high proportion of the group's sales values comprise materials, both the price of and the supply of materials are decisive to profitability. NOTE's strategic sourcing company NOTE Components manages a substantial portion of materials sourcing agreements.

Conversion exposure

The group's foreign net assets are divided between the following currencies, amounts in SEK 000:

	31 Dec 2009		31 Dec 2008
Currency	Amount	%	Amount	%
CNY	1,085	0.5	–	–
EEK	1,365	0.7	1,629	0.6
EUR	10,883	5.2	10,773	3.7
GBP	860	0.4	2,532	0.9
LTL	5,840	2.8	12,969	4.4
NOK	4,298	2.0	3,451	1.1
PLN	26,598	12.6	16,776	5.7
USD	3,913	1.9	6,721	2.3
	54,842	26.1	54,851	18.7

Sensitivity analysis

To manage market risks, the group's intention is to minimise the impact of short-term fluctuations in consolidated profit/loss.

		Effect on profit/loss after tax
Market risk, SEK m	Change, 2%	Change, 5%
Change in sales price to customers	17.7	44.2
Change in sales volume	4.8	12.0
Change in materials price *	10.6	26.4
Change in payroll overheads	4.8	12.1
Change in interest rates	3.3	8.4
Change in exchange rates on customer and supplier liabilities as of 31 Dec 2009	0.4	1.0
Change in exchange rates when translating foreign units' net profit.	0.7	1.7

* Disregarding price adjustment clauses to customers.

Note 27 Operating leases

	31 Dec 2009	31 Dec 2008
Lease arrangements payable within one year	4,886	2,822
Lease arrangements payable between one and five years	9,517	8,932
	14,403	11,754

Group expenses for operating leases were 6,365 (4,511).

Note 28 Pledged assets and contingent liabilities

	31 Dec 2009	31 Dec 2008
Pledged assets
In the form of pledged assets for own liabilities and provisions
Property mortgage	27,571	29,843
Floating charge (approx.)	261,581	253,842
Factored accounts receivable—trade	189,441	–
	478,593	283,685
Contingent liabilities
Guarantee commitments, FPG/PRI	242	228
County administrative board, conditional loan	1,459	2,484
	1,701	2,712

Note 29 Close relations

Close relation	Yr.	Sale of goods and services to related parties	Purchases from related parties	Liabilities to related parties as of 31 December	Receivables from related parties per 31 December
Companies owned by Board member of subsidiary	2009	–	–	–	–
Companies owned by Board member of subsidiary	2008	–	1,581	–	–
Senior management	2009	–	2,932	–	–
Senior management	2008	–	2,498	213	–
Joint venture	2009	31,953	88,527	8,687	16,136
Joint venture	2008	31,028	28,775	8,512	36,713

Transactions with key staff in executive positions

For the Board of Directors', the CEO's and other senior executives' salaries and other benefits, expenses and commitments relating to pensions and similar benefits, as well as agreements on severance pay, see note 7, Employees, personnel expenses and remuneration to senior management on page 44.

Note 30 Cash Flow Statement

Interest paid	2009	2008
Interest received	1,418	195
Interest paid	–4,725	–9,595
Other non-cash items	2009	2008
Impairment losses	6,544	8,300
Unrealised exchange rate differences	–527	–4,069
Capital gain/loss on sale of property, plant and equipment	477	1,203
Capital gain/loss on sale of operation	11,807	–
Pension provisions	836	998
Other provisions	16,573	29,903
Other items not affecting liquidity	963	–598
	36,673	35,737

Transactions not involving payments	2009	2008
Purchase of asset through finance lease	–	17,571

Acquisitions of subsidiaries and joint ventures	2009	2008
Acquired assets and liabilities
Intangible assets	3,607	9,786
Property, plant and equipment	7,015	4,459
Financial assets	239	40
Inventories	6,462	12,040
Trade receivables	23,072	10,550
Cash and cash equivalents	2,845	776
	43,240	37,651
Provisions	266	6,023
Current interest-bearing liabilities	15,246	4,152
Current trade liabilities	20,048	17,449
	35,560	27,624
Purchase price	6,478	10,027
Purchase price paid for acquisitions in previous year	–	8,569
Cash and cash equivalents in acquired operation	–1,643	–776
Effect on cash and cash equivalents	4,835	17,820
Cash and cash equivalents	31 Dec 2009 31 Dec 2008
Cash and bank balances	24,416	35,941
	24,416	35,941
Un-utilised credits	31 Dec 2009 31 Dec 2008
Un-utilised credits	26,323	48,711

Note 31 Significant estimates and judgements

Critical judgements when applying the group's accounting principles

Some critical accounting estimates made when applying the group's accounting principles are reviewed below.

Accounts receivable—trade and inventories

Accounts receivable—trade and inventories are the largest asset items in value terms at year-end. Both these items are reported as net values after deducting for impairment losses, based on individual judgment. Note 26 provides more information on the judgments made and information on the risks associated with these asset items.

Goodwill

The group's goodwill relates to the Swedish and foreign subsidiaries/joint ventures. Goodwill is subject to impairment tests pursuant to IAS 36 Impairment of Assets. Note 12 states more information on the measurement of goodwill items.

Deferred tax assets

The group's deferred tax assets mainly consist of provisions and capitalised loss carryforwards in foreign subsidiaries. Note 11 states more information on the group's deferred tax assets.

Pension liability

The various parameters used for the actuarial calculation of pension liabilities are associated with uncertainty. Pay increases are estimated on the basis of expected outcomes of negotiation rounds. Inflation is judged on the basis of history and external forecasts. The discount factor is set at expected future finance costs, based on government bonds with comparable maturities as the relevant pension liability.

Exposure to foreign currencies

Changes in exchange rates have a relatively limited effect on the group's reported profit and financial position. Note 26 details foreign currency exposure and the risks associated with changes to exchange rates.

Note 32 Subsequent events

New President and CEO

On 24 January 2010, Göran Jansson was appointed Acting President and CEO of NOTE. Mr. Jansson is Deputy Chairman, and has been a Board member of NOTE since spring 2007. Mr. Jansson was previously CFO of Kinnevik, and then CFO and Deputy Chairman of ASSA ABLOY for some ten years.

Mr. Jansson succeeded Knut Pogost, who held senior executive positions with NOTE for four years, most recently as President and CEO.

New share issue

The Board of Directors of NOTE AB (publ) ("NOTE" and the "Company") have decided to conduct a guaranteed new share issue of some SEK 87 m through the issue of new shares with preferential rights for NOTE's shareholders. The Board's issue decision is conditional on the approval of the Company's Extraordinary General Meeting on 7 April 2010. The new share issue is being conducted for NOTE to be financially secure for its continued structural transformation and to exploit business opportunities on the market.

Further structural adaptation

As part of NOTE's continued structural transformation, an overhaul of the group's units has been conducted. NOTE will utilise its unique strengths and competence in the high mix/ low volume market segment better. The objective is to take savings and rationalisation measures that create a positive profit effect of at least SEK 50 m in annualised terms during 2010. As part of this package, NOTE will further concentrate its production units in Sweden and internationally. The estimated cost of this rationalisation package is some SEK 45 m, which will be charged to profits in the first quarter of 2010.

Parent Company Income Statement

SEK 000	NOTE	2009	2008
Net revenue		45,901	64,904
Cost of sold services		–39,493	–30,891
Gross profit/loss		6,408	34,013
Selling expenses		–10,644	–22,905
Administrative expenses		–21,188	–26,463
Other operating revenue	2	2,476	1,397
Other operating expenses	3	–4,347	–181
Operating profit/loss	4, 5, 14, 17	–27,295	–14,139
Profit/loss from financial items	6
Profit/loss from participations in group companies		5,283	5,095
Other interest income, etc.		2,999	15,640
Interest costs, etc.		–6,236	–12,258
Profit/loss after financial items		–25,249	–5,662
Appropriations	7	48,108	–15,500
Profit/loss before tax		22,859	–21,162
Tax	8	–4,907	6,959
Profit/loss after tax		17,952	–14,203

Parent Company Balance Sheet

ASSETS Non-current assets Intangible assets 898 3,800 9 Property, plant and equipment 1,972 2,551 10 Financial assets Participations in group companies 263,366 201,428 20 Participations in joint ventures 24,636 37,698 21 Deferred tax asset 2,463 – Other receivables 2,086 – Receivables from group companies 50,234 44,832 11 Receivables from joint ventures – 9,109 11 Total financial assets 342,785 293,067 Total non-current assets 345,655 299,418 Current assets Current receivables Receivables from group companies 111,597 276,005 12 Receivables from joint ventures – 452 12 Other receivables 5,418 2,422 Prepaid expenses and accrued income 1,031 295 118,046 279,174 Total current receivables Cash and bank balances 4,816 12,990 23 Total current assets 122,862 292,164 TOT AL ASSETS 468,517 591,582 EQUITY AND LIABILITIES Equity Restricted equity Share capital (9,624,200 class A shares) 4,812 4,812 Statutory reserve 148,161 148,161 Non-restricted equity Profit/loss brought forward 86,189 121,248 Profit/loss after tax 17,952 –14,203 Total equity 257,114 260,018 Un-taxed reserves – 48,108 22 Provisions 6,130 – 15 Non-current liabilities Liabilities to credit institutions – 34,997 13 Liabilities to group companies 6,760 6,487 Total non-current liabilities 6,760 41,484 Current liabilities Liabilities to credit institutions 64,845 179,094 13 Accounts payable—trade 365 1,165 Liabilities to group companies 126,300 48,833 Liabilities to joint ventures 7 – Current tax liabilities – 1,251 Other liabilities 222 1,386 Accrued expenses and deferred income 6,774 10,243 16 Total current liabilities 198,513 241,972 TOT AL EQUITY AND LIABILITIES 468,517 591,582 Pledged assets and contingent liabilities for parent company	SEK 000	Note	31 Dec 2009	31 Dec 2008
	Pledged assets	18	–	–
Contingent liabilities 29,410 17,429 18

Summary Statement of Changes in Parent Company's Equity

	Restricted equity			Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit/loss brought forward	Profit/loss for the year	Total equity
Opening equity, 1 Jan 2008	4,812	148,161	122,059	–26,264	248,768
Appropriation of profits	–	–	–26,264	26,264	–
Group contribution received	–	–	82,312	–	82,312
Group contribution paid	–	–	–10,200	–	–10,200
Tax relating to items reported directly in equity	–	–	–20,192	–	–20,192
Profit/loss after tax	–	–	–	–14,203	–14,203
Total changes in net worth excluding transac tions with the company's shareholders	–	–	25,656	–14,203	11,453
Dividend	–	–	–26,467	–	–26,467
Closing equity, 31 Dec 2008	4,812	148,161	121,248	–14,203	260,018

		Restricted equity		Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit/loss brought forward	Profit/loss for the year	Total equity
Opening equity, 1 Jan 2009	4,812	148,161	121,248	–14,203	260,018
Appropriation of profits	–	–	–14,203	14,203	–
Group contribution received	–	–	6,800	–	6,800
Group contribution paid	–	–	–35,100	–	–35,100
Tax relating to items reported directly in equity	–	–	7,443	–	7,443
Profit/loss after tax	–	–	–	17,952	17,952
Total changes in net worth excluding transac tions with the company's shareholders	–	–	–35,060	17,952	–17,108
Closing equity, 31 Dec 2009	4,812	148,161	86,189	17,952	257,114

Parent Company Cash Flow Statement

SEK 000	NOTE	2009	2008
Operating activities	23
Profit/loss after financial items		–25,249	–5,662
Reversed depreciation		1,360	772
Other non-cash items		6,131	–
Tax paid		–2,148	–21,595
		–19,906	–26,485
Cash flow from change in working capital
Increase (–)/decrease (+) in trade receivables		170,519	–23,552
Increase (+)/decrease (–) in trade liabilities		37,214	15,323
		207,733	–8,229
Cash flow from operating activities		187,827	–34,714
Investing activities
Purchase of property, plant and equipment		–	–2,593
Sale of property, plant and equipment		193	–
Purchase of intangible assets		–	–4,342
Sale of intangible assets		1,928	–
Investments in subsidiaries		–43,289	–23,606
Investments in joint venture		–5,587	–26,229
Purchase of other financial assets		–	–18,905
Cash flow from investing activities		–46,755	–75,675
Financing activities
Borrowings		50,000	3,932
Group contributions received		–	158,300
Amortisation of loans		–199,246	–20,004
Dividend paid		–	–26,467
Cash flow from financing activities		–149,246	115,761
Cash flow for the year		–8,174	5,372
Cash and cash equivalents
At beginning of period		12,990	7,618
Cash flow before financing activities		141,072	–110,389
Cash flow from financing activities		–149,246	115,761
Cash and cash equivalents at end of period		4,816	12,990

Notes on the Parent Company's Financial Statements

Note 1 Critical accounting principles

Parent company accounting principles

The parent company has prepared its annual accounts pursuant to the Swedish Annual Accounts Act and RFR's (Rådet för finansiell rapportering, the Swedish Financial Reporting Board) recommendation RFR 2:2, Accounting for Legal Entities. RFR's statements for listed companies have also been adopted. RFR 2:2 stipulates that in its annual accounts as a legal entity, the parent company should adopt all IFRS and statements endorsed by the EU, providing this is possible within the framework of the Swedish Annual Accounts Act, The Swedish Pension Obligations Vesting Act (Tryggandelagen) and with consideration to the relationship between accounting and taxation. This recommendation states the exemptions and supplements to be made from and to IFRS.

Accordingly, the parent company adopts those principles presented in note 1 of the consolidated accounts, subject to the exceptions stated below. These principles have been applied consistently for all years presented, unless otherwise stated.

Subsidiaries and joint ventures

Participations in subsidiaries and joint ventures are reported in the parent company pursuant to the cost method. Dividends received are only recognised as revenues if they are sourced from earnings accrued after the acquisition. Dividends exceeding these accrued earnings are considered as a re-payment of the investment and reduce the value of the participations.

Financial guarantees

The parent company has granted sureties in favour of subsidiaries. Pursuant to IFRS, these obligations are classified as financial guarantee agreements. For such agreements, the parent company applies the relaxation of RFR 2:2 point 72, and accordingly reports the surety as a contingent liability. When the company judges that it is likely that payment will be required to settle the obligation, a provision is made.

Borrowing costs

The company expenses all borrowing costs immediately.

Revenues

Sales of goods and conducting services assignments The revenue of services assignments in the parent company is recognised pursuant to Chap. 2 §4 of the Swedish Annual Accounts Act when the services are complete. All parent

Property, plant and equipment

company sales are to other group companies.

Property, plant and equipment in the parent company are reported at cost less deductions for accumulated depreciation and potential impairment losses in the same manner as for the group, but with a supplement for potential revaluations.

Leases

All lease arrangements in the parent company are reported pursuant to the rules for operating leases.

Tax

In the parent company, untaxed reserves are reported including deferred tax liabilities.

Group contributions and shareholders' contributions for legal entities

The company reports group contributions and shareholders' contributions pursuant to statements from the RR Emerging Issues Task Force. Shareholders' contributions are reported directly to the recipient's equity and capitalised in shares and participations of the issuer, to the extent no impairment losses are necessary. Group contributions are reported pursuant to their economic substance, which means that group contributions paid with the aim of minimizing the group's total tax are reported directly against retained profits less deductions for their current tax effect.

Note 2 Other operating revenue

	2009	2008
Exchange gains on trade receivables/liabilities	2,476	1,397
	2,476	1,397

Note 3 Other operating expenses

	2009	2008
Exchange losses on trade receivables/liabilities	–4,347	–181
	–4,347	–181

Note 4 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits

	2009	2008
Salaries and benefits	–17,760	–20,010
Pension expenses, defined-contribution plans	–4,486	–4,681
Social security contributions	–6,653	–7,486
	–28,899	–32,177

Restructuring costs

Expenses for employee benefits include restructuring costs and provisioning for the departing CEO of 9,347 (–).

		Of which		Of which
Average number of employees	2009	men	2008	men
Sweden	14	50%	19	62%
	14	50%	19	62%

	2009 Share of	2009 Share of
Division between sexes in group management	women	women
Board of Directors	0%	0%
Other senior management 6 (4) people	0%	25%

Salaries, other benefits and social security contributions

	2009			2008
	Salaries &	Social security	Salaries &	Social security
	benefits	contributions	benefits	contributions
	(of which	(of which pen	(of which	(of which pen
	bonus)	sion expense)	bonus)	sion expense)
Management	–9,762	–6,528	–6,895	–4,674
	(–)	(–2,896)	(–)	(–2,192)
Other employees	–8,723	–4,836	–13,905	–7,493
	(–)	(–1,590)	(–)	(–2,489)

Comments on the table:

Management is the Board of Directors and CEO, and the parent company's management.

Sickness absence in parent company

Sickness absence in the parent company was 0.3 (0.2)%. No information by sex and age group is disclosed because it could be attributed to individuals.

Note 5 Auditors' fees and reimbursement

	2009	2008
PwC
Auditing assignments	–770	–330
Other assignments	–87	–178
Other Auditors
Auditing assignments	–	–150
Other assignments	–	–26

Auditing assignments means auditing the annual accounts and accounting records and the Board of Directors' and President's administration, other tasks incumbent on the company's auditors and advisory or other services resulting from observations from such audit, or the performance of other similar duties. Everything else is classified as other assignments.

Note 6 Net financial income/expense

	2009	2008
Profit/loss from participations in group companies
Dividend from group companies	5,283	5,095
	5,283	5,095
Interest income, etc.
Interest income, group companies	2,997	8,686
Exchange rate differences	–	6,643
Interest income, other	2	311
	2,999	15,640

	2009	2008
Interest costs, etc.
Interest costs, group companies	–1,655	–1,579
Interest costs, other	–2,101	–10,671
Exchange rate differences	–2,480	–
Other	–	–8
	–6,236	–12,258

Note 7 Appropriations

	2009	2008
Tax allocation reserve, provision/dissolution for the year	48,108	–15,500
	48,108	–15,500

Note 8 Tax

Reported in Income Statement			2009	2008
Current tax expense (–)/tax revenue (+)
Tax expense/tax revenue for the period			–7,443	6,959
Adjustment of tax attributable to previous year			73	–
Deferred tax expense (–)/tax revenue (+)
Deferred tax revenue/expense in capitalised/utilised tax values of loss carry-forwards			2,463	–
Total reported tax			–4,907	6,959
Reconciliation of effective tax	%	2009	%	2008
Profit/loss before tax		22,859		–21,162
Tax at applicable rate for parent company	26.3	–6,012	28.0	5,925
Non-deductible expenses	0.4	–87	–0.6	–126
Non-taxable revenue	–6.1	1,389	6.8	1,434
Standard interest on tax allocation reserve	1.2	–270	–1.3	–274
Tax attributable to previous year	–0.3	73	–	–
		21.5 –4,907	32.9	6,959
Tax items reported directly against equity			2009	2008
Current tax in group contributions received/paid			–7,443	–20,192
			–7,443	–20,192

Note 9 Intangible assets

The useful life of goodwill is indeterminable while the useful lives of other intangible assets is determinable and conforms to what is stated in note 1, Accounting principles. Intangible assets with determinable useful lives are amortised on a straight-line basis over their useful lives.

	Capitalised expenditure for software, acquired
Cumulative cost
Opening balance, 1 Jan 2008	–
Investments	4,342
Divestments and disposals	–
Closing balance, 31 Dec 2008	4,342
Opening balance, 1 Jan 2009	4,342
Investments	44
Divestments and disposals	–2,960
Closing balance, 31 Dec 2009	1,426
Accumulated amortisation
Opening balance, 1 Jan 2008	–
Impairment for the year	–
Amortisation for the year	–542
Divestments and disposals	–
Closing balance, 31 Dec 2008	–542

Capitalised expenditure for software, acquired
–542
–
–974
988
–528
–
3,800
3,800
898

Amortisation and impairment

Amortisation is included in the following
Income Statement lines	2009	2008
Cost of goods sold and services	–974	–542
Administrative expenses	–	–
Selling expenses	–	–
	–974	–542

Note 10 Property, plant and equipment

	Equipment, tools, fixtures and fittings
Cost
Opening balance, 1 Jan 2008	629
Investments	2,593
Divestments and disposals	–
Reclassification	–3
Closing balance, 31 Dec 2008	3,219
Opening balance, 1 Jan 2009	3,219
Investments	–
Divestments and disposals	–265
Reclassification	–
Closing balance, 31 Dec 2009	2,954
Depreciation
Opening balance, 1 Jan 2008	–441
Depreciation for the year	–230
Divestments and disposals	–
Reclassification	3
Closing balance, 31 Dec 2008	–668
Opening balance, 1 Jan 2009	–668
Depreciation for the year	–386
Divestments and disposals	72
Reclassification	–
Closing balance, 31 Dec 2009	–982
Carrying amounts
1 Jan 2008	188
31 Dec 2008	2,551
1 Jan 2009	2,551
31 Dec 2009	1,972

Depreciation and impairment

Depreciation Is included In the following Income Statement lines	2009	2008
Cost of goods sold and services	–	–91
Administrative expenses	–193	–70
Selling expenses	–193	–69
	–386	–230

Note 11 Long-term and other receivables

	31 Dec 2009	31 Dec 2008
Long-term receivables
Receivables from joint ventures	–	9,109
Receivables from group companies	50,234	44,832
	50,234	53,941
Cumulative cost
Long-term receivables
At beginning of year	53,941	191,135
Purchase	4,835	6,620
Re-payment	–8,542	–143,814
	50,234	53,941

Note 12 Current receivables from group companies

	Receivables from group companies		joint ventures	Receivables from
	31 Dec 2009	31 Dec 2008	31 Dec 2009	31 Dec 2008
Cumulative cost
At beginning of year	276,005	177,018	452	–
Loans	58,100	118,916	–	–
Overdraft facility	31,175	130,876	–	–
Accounts receivable— trade, current receivables	22,322	26,213	–	452
Re-paid liabilities	–276,005	–177,018	–452	–
	111,597	276,005	–	452

Note 13 Interest-bearing liabilities

	31 Dec 2009	31 Dec 2008
Non-current liabilities
Bank loans	–	34,997
	–	34,997
Current liabilities
Overdraft facility	63,090	90,096
Short-term portion of bank loans	–	88,998
Other interest-bearing liabilities	1,755	–
	64,845	179,094

Note 14 Pension commitments

		Parent company
	2009	2008
Expenses for defined-contribution plans	3,263	4,482

Note 15 Provisions

31 Dec 2009	31 Dec 2008
–	8,051
8,803	–
–2,673	–8,051
6,130	–
–	–
6,130	–

The parent company's provisions are for additional purchase prices for acquisitions in 2008 and provisioning for payroll expenses for the departing CEO in 2009.

Note 16 Accrued expenses and deferred income

	31 Dec 2009	31 Dec 2008
Accrued salaries and benefits	1,050	2,358
Accrued social security contributions	2,367	3,253
Payment for vacation taken in cash	1,061	1,973
Other	2,296	2,659
	6,774	10,243

Note 17 Operating leases

	31 Dec 2009	31 Dec 2008
Lease arrangements payable within one year	215	273
Lease arrangements payable between one and five years	860	215
	1,075	488

Parent company expenses for operating leases were 712 (696).

Note 18 Pledged assets and contingent liabilities

	31 Dec 2009 31 Dec 2008
Contingent liabilities
Guarantee commitments, FPG/PRI	12,748	11,961
Sureties in favour of subsidiaries	16,662	5,468
	29,410	17,429

Note 19 Close relations

Close relation	Yr.	Sale of goods and services to related parties	Purchases from related parties	Liabilities to related parties as of 31 December	Receivables from related parties as of 31 December
Senior management	2009	–	2,368	–	–
Senior management	2008	–	1,431	213	–
Joint venture	2009	–	–	7	–
Joint venture	2008	–	32	32	9,561

Transactions with key staff in executive positions

For the Board of Directors', the CEO's and other senior executives' salaries and other benefits, expenses and commitments relating to pensions and similar benefits, as well as agreements on severance pay, see note 7 for the group.

Note 20 Group companies

Specification of the parent company's direct holdings of shares in subsidiaries

Subsidiary/Corporate identity no./Registered office	No. of shares	31 Dec 2009 Carrying amount	31 Dec 2008 Carrying amount
NOTE Norrtelje AB, 556235-3853, Norrtälje, Sweden	1,000	50,000	50,000
NOTE Lund AB (publ), 556317-0355, Lund, Sweden	10,661	42,491	42,491
NOTE Components Gdansk Sp. z o.o, 583-26-15-588, Gdansk, Poland	333	34,197	17,246
IONOTE EMS Ltd, CR-134187, Tangxia	9,000,000	25,122	–
NOTE Pärnu OÜ, 10358547, Pärnu, Estonia	1	23,438	22,047
NOTE Norway AS, 982 609 380, Oslo, Norway	1,000	22,354	14,896
NOTE Nyköping-Skänninge AB, 556161-4339, Skänninge, Sweden	9,000	19,509	19,509
NOTE Skellefteå AB, 556430-0183, Skellefteå, Sweden	5,000	16,078	16,078
NOTE UK Ltd, 5257074, Telford, UK	1,250,000	14,237	5,623
NOTE Borås AB, 556567-6193, Borås, Sweden	50,000	5,000	5,000
NOTE Tauragé UAB, 1076886, Tauragé, Lithuania	15,000	3,175	3,175
NOTE Torsby AB, 556597-6114, Torsby, Sweden	30,000	3,000	3,000
NOTE Hyvinkää Oy, 1931805-1, Hyvinkää, Finland	80	1,347	1,347
NOTE Components Järfälla AB, 556749-2409, Järfälla, Sweden	1,000	1,500	800
IONOTE Electronics (Dongguan) Ltd, Dongguan, China	1	1,202	–
NOTE International AB, 556655-6782, Danderyd, Sweden	1,000	616	116
NOTE Components AB, 556602-2116, Danderyd, Sweden	1,000	100	100
		263,366	201,428

The participating interest is 100 (100) % in all companies. In addition to the above directly owned subsidiaries, the group includes a second-tier subsidiary (NOTE Björbo AB).

Cumulative cost	31 Dec 2009	31 Dec 2008
At beginning of year	204,328	177,175
Investments/acquisitions	61,938	27,153
	266,266	204,328
Accumulated impairment losses
At beginning of year	–2,900	–2,900
Impairment for the year	–	–
	–2,900	–2,900
	263,366	201,428

Note 21 Parent company participations in joint ventures

		Joint ventures
Cumulative cost	31 Dec 2009	31 Dec 2008
At beginning of year	37,698	18,648
Acquisitions/investments	5,586	19,050
Transferred to subsidiaries	–18,648	–
Closing balance, 31 December	24,636	37,698

Specification of parent company (joint owner's) direct holdings of participations in joint ventures

2009	Vote and share of equity, %	Carrying amount
NOTEFideltronik S.A., 120621500, Krakow	50	24,636
2008
IONOTE Ltd, CR-134187, Tangxia	50	18,648
NOTEFideltronik S.A., 120621500, Krakow	50	19,050
		37,698

Note 22 Un-taxed reserves

	31 Dec 2009	31 Dec 2008
Tax allocation reserves, for tax assessment in 2007	–	10,208
Tax allocation reserves, for tax assessment in 2008	–	22,400
Tax allocation reserves, for tax assessment in 2009	–	15,500
	–	48,108

Note 23 Cash Flow Statement

Interest paid and dividend received	2009	2008
Interest received	2,999	8,995
Interest paid	–3,256	–12,250
Dividend received	5,283	5,095
Other non-cash items
	2009	2008
Other provisions	6,130	–
Other items not affecting liquidity	1	–
	6,131	–
Cash and cash equivalents	31 Dec 2009	31 Dec 2008
Cash and bank balances	4,816	12,990
	4,816	12,990
Un-utilised credits	31 Dec 2009	31 Dec 2008
Un-utilised credits	16,910	34,904

Note 24 Information on the parent company

NOTE AB (publ) is a Swedish-registered limited company with its registered office in Danderyd, Sweden. The parent company's shares are listed on NASDAQ OMX Sweden's Nordic List. The address of the head office is NOTE AB (publ), Box 711, 182 17 Danderyd, Sweden. The corporate identity number is 556408-8770. The consolidated accounts for 2009 comprise the parent company, its subsidiaries and joint ventures, collectively termed the group.

The Board of Directors and Chief Executive Officer hereby certify that the consolidated accounts have been prepared pursuant to IFRS as endorsed by the EU and give a true and fair view of the group's financial position and results of operations. The annual accounts have been prepared pursuant to generally accepted accounting principles and give a true and fair view of the parent company's financial position and results

of operations. The Reports of the Directors of the group and parent company give a true and fair view of the group's and parent company's operations, financial position and results of operations and review the significant risks and uncertainty factors facing the parent company and group companies.

Danderyd, Sweden, 29 March 2010

Bruce Grant Chairman

Bo Andersson Håkan Gellerstedt Göran Gezelius Board member Board member Board member

Per-Arne Sandström Göran Sigfridsson Jimmy Almevind Christoffer Skogh

Board member Board member Board member/Employee representative Board member/Employee representative

Göran Jansson CEO and Deputy Chairman

As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 29 March 2010. The Consolidated Income Statement and Consolidated Income Balance Sheet and the Parent Company Income Statement and Parent Company Balance Sheet will be subject to adoption at the Annual General Meeting on 27 April 2010.

Our Audit Report was presented on 30 March 2010

Öhrlings PricewaterhouseCoopers AB

Magnus Brändström Anders Magnussen

Senior Auditor Authorised Public Accountant

Authorised Public Accountant

Audit Report

To the Annual General Meeting of the shareholders of NOTE AB (publ) Corporate identity number 556408-8770

We have audited the annual accounts, the consolidated accounts, accounting records and the administration of the Board of Directors and the President of NOTE AB (publ) for the year 2009. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 33–62. These accounts and the administration of the company, and the application of the Swedish Annual Accounts Act when preparing the annual accounts, and the application of IFRS (International Financial Reporting Standards) as endorsed by the EU and the Swedish Annual Accounts Act when preparing the consolidated accounts, are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

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

We recommend to the Annual General Meeting that the Income Statement and Balance Sheet for the parent company and for the group be adopted, that the profit of the parent company be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year.

Stockholm, Sweden, 30 March 2010

Öhrlings PricewaterhouseCoopers AB

Magnus Brändström Anders Magnussen

Senior Auditor Authorised Public Accountant

Authorised Public Accountant

Addresses

NOTE AB Box 711 Vendevägen 85 A 182 17 Danderyd

Sweden

NOTE Components Box 711 Vendevägen 85 A

182 17 Danderyd Sweden

NOTE Components Järfälla Saldovägen 1 175 62 Järfälla Sweden

NOTE Lund Maskinvägen 3 227 30 Lund

Sweden

NOTE Norrtelje Box 185 Vilhelm Mobergs gata 18 761 22 Norrtälje Sweden

NOTE Nyköping

Box 268 Gästabudsvägen 6 611 26 Nyköping Sweden

NOTE Skänninge Box 53 Borgmästaregatan 32 596 22 Skänninge Sweden

NOTE Torsby Inova Park 685 29 Torsby Sweden

IONOTE Electronics

6 Ling Dong Road Lin Cun Industrial Center Tangxia, Dongguan Guangdong Province 523710 China

NOTE Components Gdansk Trakt sw Wojciecha 237 80-017 Gdansk Poland

NOTE Fideltronik

ul.Cystersów 19 31-553 Krakow Poland

NOTE Hyvinkää Avainkierto 3 05840 Hyvinkää Finland

NOTE Norway

Jogstadveien 21 2007 Kjeller Norway

NOTE Pärnu

Laki 2 80010 Pärnu Estonia

NOTE Tauragé

Pramon'es g 2A 5900 Taurage Lithuania

NOTE UK

Stroudwater Business Park Brunel Way Stonehouse Gloucestershire GL10 3SX England

www.note.eu info@note.eu

While every care has been taken in the translation of this Annual Report, readers are reminded that the original Annual Report, signed by the Board of Directors, is Swedish.

NOTE AB (PU BL) Annual Report 2009 Corporate identity number 556408-8770

Text: NOTE AB and Full Tank. Production and graphic design: Olsson & Per. Images: Jann Lipka and Christopher-Robin Eklund. Printing: Rolf Tryckeri AB. Translation: Turner & Turner