NOTE — Annual Report 2010

Apr 7, 2011

Annual Report 2010

Contents

Introduction

This is NOTE	1
Milestones in NOTE's history	2
The year in brief	4
CEO's statement	6
Operations
Vision, business concept and goals	8
Business model	10
Market and competitors	13
What they are saying about NOTE	16
Risk management	17
Quality, environment and ethics	18
Human resources	20
Organisation and group management	23
Five-year summary	24
Financial definitions	25

The NOTE share
Share data and shareholders	26
Formal Annual Accounts
Corporate Governance Report	29
Report of the Directors	36
Consolidated accounts	40
Parent company accounts	58
Audit Report	68
Addresses	69

Shareholder information

Annual General Meeting

The AGM (Annual General Meeting) will be held at 11:00 am on Thursday, 28 April at Spårvagnshallarna, Birger Jarlsgatan 57 A, 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

20 April, and notify NOTE of their intention to participate by no later than 4:00 pm on 20 April.

Business

The agenda and business of the AGM has been 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 2010.

Nomination Committee

The Nomination Committee has the following members:

Stefan Charette (representing Investment AB Öresund)

Bruce Grant (representing Garden Growth Capital LLC)

Christer Sandberg (representing Banque Carnegie Luxembourg SA)

Ulf Strömsten (representing Catella Fondförvaltning)

Financial information

Calendar

Interim Report, Jan–Mar 2011	28 Apr 2011
Interim Report, Jan–Jun 2011	15 Jul 2011
Interim Report, Jan–Sep 2011	20 Oct 2011

Ordering financial information

Financial and other relevant information can be ordered from NOTE. Out of consideration for the environment, the amount of printed matter has been reduced and a subscription service is readily available from NOTE's website.

• Website: www.note.eu
• Tel: +46 (0)8 568 99000
• Fax: +46 (0)8 568 99099
• Address: NOTE AB, Box 711, 182 17 Danderyd, Sweden

Investor Relations contacts

President and Chief Executive Officer Peter Laveson Tel: +46 (0)8 568 99006, +46 (0)70 433 9999 e-mail: peter.laveson@note.eu

Chief Financial Officer Henrik Nygren Tel: +46 (0)8 568 99003, +46 (0)70 977 0686 e-mail: henrik.nygren@note.eu

This is NOTE

NOTE offers manufacturing services for electronics products right through product lifecycles—from design to after-sales.

NOTE is one of the leading manufacturing partners for outsourced electronics production in the Nordics. It has especially strong market positioning in the high mix/low volume market segment, i.e. for products in small to medium-sized series that require high technology competence and flexibility. NOTE produces PCBs, sub-assemblies and box build products. NOTE's offering covers the whole product lifecycle, from design to after-sales.

NOTE's business is organised to address the differing needs of its customers optimally. NOTE's Nearsourcing centres deliver development and production technology services in close collaboration with customers, such as selecting materials, prototyping, series production and testing. NOTE's Industrial Plants deliver cost-efficient volume production in Europe and Asia.

Customers are mainly in the engineering and communication industries in the Nordics and UK.

Key facts

• Production capacity: Sweden, Norway, Finland, UK, Estonia and China.
• Number of employees as of 31 December 2010: 942.
• Sales in 2010: SEK 1,211 m.
• Share: Quoted on NASDAQ OMX Stockholm (Small Cap/Information Technology). At year-end 2010, the share price was SEK 8.30. Market capitalisation was SEK 240 m, divided between 28,872,600 shares.

Milestones in NOTE's history

1999 Company founded on the business concept of producing electronics in Central Europe for Swedish customers jointly with collaboration partners. The gateway to this European region is opened through the start-up of an operation in Gdansk, Poland.

2001 NOTE takes the initiative for a multinational network of independent electronics producers in Europe, South and North America and Asia. The goal: to help growth customers find production alternatives close to the markets where they want to expand.

2004 NOTE's IPO on the Stockholm Stock Exchange.

2000 Merger with an electronics producer in Norrtälje, Sweden. A well-established enterprise in Torsby, Sweden, is also quickly acquired. The current goal is to grow and conduct an IPO of the group within five years.

2001–2003 NOTE Components formed to co-ordinate the group's global sourcing. NOTE makes a number of acquisitions in Sweden, which also bring a presence in Lithuania.

2007 NOTE's production capacity extended through joint ventures in China and Poland. NOTE opens one of Sweden's most advanced electronics plants in Norrtälje.

2009 Another acquisition in Norway. A series of rationalisation measures are taken in the group to address the recession.

2010 Fundamental reorientation and concentration of the operation that started post-financial crisis in 2008 results in the closure of more operations or their relocation to other parts of the group.

2005–2006 More acquisitions in Sweden, Norway, Finland and Estonia.

2008 Acquisition of an electronics enterprise in the UK and a mechanics enterprise in Sweden. The financial crisis and following recession hit the sector hard.

2009/2010 The Chinese operation becomes a wholly owned subsidiary at year-end. NOTE's operation in Skellefteå, Sweden, closes after one customer discontinues a major telecommunication product.

The year in brief

January–December

• Sales were SEK 1,210.7 (1,200.1) million. In like-for-like terms, sales increased by 16 percent.
• The underlying operating loss, excluding structural and other non-recurring costs, was SEK –1.4 (–27.1) million.
• The operating loss was SEK –48.2 (–90.8) million.
• The operating margin was –4.0 (–7.6) percent.
• The loss after financial items was SEK –59.4 (–97.9) million. Excluding structural and other non-recurring costs, the loss after financial items was SEK –12.6 (–34.2) million.
• The loss after tax was SEK –62.0 (–81.0) million.
• Earnings per share were SEK –2.55 (–5.14) per share. Excluding structural costs and other non-recurring costs, earnings per share were SEK –1.13 (–2.16) per share.
• Cash flow after investments was SEK –13.6 (23.9) million, equating to SEK –0.56 (1.52) per share.

Highlights of the year

• Structural measures decided in the first quarter involving the relocation and closure of production at Skänninge, Sweden, and Tauragé, Lithuania, were completed. In addition, operations at Gdansk in Poland closed down as planned at year-end. The cost of these actions and other non-recurring costs of SEK –47 million were charged to loss for the year. Overall, NOTE estimates that these actions will result in a positive profit effect of over SEK 50 million annualised.

• NOTE conducted a guaranteed new issue with a gross total of some SEK 87 million in the second quarter, with preferential rights for NOTE's current shareholders.

• Peter Laveson was appointed as NOTE's new CEO and President in July. Peter replaced Göran Jansson, who was acting CEO and President since January.

• In recent years, NOTE has accumulated a proprietary preferred parts database that is unique in the sector—NOTEfied. To increase efficiency and the number of customers of NOTEfied, NOTE decided to organise its operations in CAD (PCB design) and NOTEfied into a separate company in the summer. This action affected a total of some 20 staff in Sweden, Norway and Poland. NOTE is a partner in this new company. The principal owner is the Norwegian Anders G Johansen, who was key to

the build-up of NOTEfied. The transfer was completed during the fourth quarter of the year and resulted in a smaller-scale capital gain.

An agreement on the divestment of NOTE's 50 percent holding in the NOTEFideltronik electronics plant in Krakow, Poland, was signed at yearend. The acquirer is former partner and 50 percent owner Zbigniew Fidelus, also principal owner of the Polish electronics producer Fideltronik. This sale resulted in a smaller-scale capital gain in the second quarter of the year.

Overview of 2010, SEK m	Full year	Q1	Q2	Q3	Q4
Sales	1,210.7	273.5	298.6	271.8	366.8
Non-recurring costs	46.8	44.0	–	2.8	–
Operating profit/loss ex cluding non-recurring costs	–1.4	–8.5	–3.8	–1.3	12.2

Sales, SEK m

Profit margin, %

CEO's statement

For NOTE, you could summarise the year 2010 with the words 'challenging' and 'concentration.' 'Challenging' from the perspective that we executed an extensive restructuring package and experienced a global component shortage, while simultaneously witnessing robustly increased demand. 'Concentration' represents that we closed a number of units, sold off and downscaled business segments to increase capacity utilisation and improve profitability.

Looking back

NOTE realised early on that in the high mix/low volume market segment, substantial business opportunities exist in combining advanced valueadded services close to the customer simultaneous with providing production in low-cost countries or close to customers' final markets. Accordingly, extensive work was done in creating a group of acquired companies with differing backgrounds, corporate cultures and competence levels into a uniform group with a collective customer offering. This is an ongoing process, and with the benefit of hindsight, we may have underestimated the cost and time for this journey.

When, like the rest of the business community, NOTE faced the financial crisis, in combination with the loss of a major customer due to a product's generational succession, NOTE was forced to raise the tempo of restructuring. NOTE implemented a new issue in spring 2010 intended to strengthen the company financially for its restructuring and create better prospects for its future.

Like my predecessor Göran Jansson, getting back into profitability as soon as possible was top of my agenda.

Progress in 2010

The poor to modest volume levels NOTE experienced in 2009 continued some way into 2010. We commenced restructuring work gradually, and our operation at Skänninge, Sweden, was the first to terminate production, in mid-July. Tauragé, Lithuania, and Gdansk,

Poland, then followed at the end of the year. In addition, we sold our operations in CAD (PCB design) and NOTEfied to NOTE staff. NOTE is a partner in this new company. We also made some modifications to central resources. At year-end, NOTE also sold its 50 percent holding in NOTEFideltronik, Krakow, Poland, which we held jointly with Fideltronik of Poland. This transaction simplifies our structure, but reduces our future sales by some 5 percent.

With these actions taken, we have now achieved concentration of our units close to customers, Nearsourcing centres, and our units for labourintensive production in low-cost countries, Industrial Plants. Labourintensive volume production has been focused on our plants in Pärnu, Estonia, and Tangxia, China.

The cost of this restructuring package and other non-recurring costs was SEK –47 million, of our reported operating loss for the full year of SEK –48.2 million. We retain our assessment that the results of the rationalisation package will mean a profit improvement of at least SEK 50 million annualised.

In the second half-year of 2010 we experienced positive volume growth. Existing customers increased order bookings and new contracts were signed. Sales in 2010 were SEK 1,210.7 (1,200.1) million. For current business, this means a 16 percent increase.

In the third quarter, current business sales grew by 23 percent, and for the fourth quarter, the increase was 37 percent. But we should note here that as part of the sale of our holdings in

NOTEFideltronik, some five percentage points of the increase in the final quarter consisted of materials sales, which had no margin, as part of the sale of our holdings in NOTEFideltronik. Demand remains firm, and I am pleased to note that customers do appreciate our offering.

For the year overall, profitability was unsatisfactory and closely linked to the non-recurring costs for our restructuring package in the first quarter. Through resolute measures, we have sharpened competitiveness, which should also be visible in financial results. The combination of continued positive sales performance and cost savings achieved meant that fourthquarter operating profit was SEK 12.2 (–2.7) million. We believe we are heading in the right direction—fourthquarter operating margin was 3.3 (–0.9) percent.

One important task for NOTE is to offer the cost-efficient supply of materials to our customers. Throughout the year, the global market for electronic components featured problematic shortages and long lead-times for materials. The combination of these problematic supply conditions and increased sales required substantial work to maintain satisfactory delivery capacity.

In addition, from time to time, shortages on the component market put big strains on our inventory and cash flow. So it is pleasing that after the summer—and despite increasing sales gains—we succeeded in downscaling our inventories. Accordingly, our cash flow after investments performed

robustly, and in the fourth quarter, was SEK 40 million. For the year overall, cash flow was SEK –14 million.

Progress report

To my mind, NOTE has undergone a very complex period. Several years of extensive change and restructuring risk affecting a company's good order and staff motivation. For this reason, through the autumn we created a groupwide governance and control system and a framework for the improvement work of units which will be monitored continuously. Thus we have created better prospects for exchanging knowhow and resources between units. My hope is that with this restructuring programme behind us, we will get an even better pay-off on our strong customer relations and abilities in 2011.

The usage of electronics in products, which traditionally have been mechanical, or in many cases, not networked, is increasing. These products feature relatively short series and long lifecycles. And here, NOTE has a very strong offering. We can assist a lot of producers so that the electronics in their products are designed produced on a high-quality and cost-efficient

basis. We can help them produce prototypes and components at the right cost effectively, simultaneous with us offering production capacity close to the customer—or for a lower cost at our units in Estonia and China.

NOTE has skilled and committed staff, which create good prospects for success. We have the following joint focuses in 2011:

• Cost savings—we will be continuing to monitor closely and adapt our cost base, according to market conditions.
• Quality enhancements—we have already made a lot of progress in our important quality work. Now, we are setting an even higher standard and our ambition is to be the best in our market segment.
• Strengthening our capital base going forward, we will retain a sharp focus on efforts that improve our utilisation of working capital. In this way, we are also reducing the risks of our business.
• Expand volumes—we will continue to grow, but profitability is our priority.

We will be taking larger shares in the high mix/low volume segment, where we have acknowledged strong positioning. We will also be sharpening our focus on small and mid-sized customers in this segment. We also know that nearly half of our Nordic customers have international operations. To grow, they need to offer products on markets that are growing. This means that more customers need to transfer their production to Asia. Accordingly, one major challenge lies in following our customers and offering services with the same high quality that we deliver in Europe. Our plant in China is well equipped to address the needs of Nordic customers that want to take the step into Asia.

Even if NOTE has undergone something of an upheaval, we still face big challenges. I am convinced that NOTE's adaptation to its future has created good prospects for delivering increased value to our customers and shareholders.

Peter Laveson President and CEO

Vision, business concept and goals

Vision

NOTE—the customer's self-evident production partner.

Business concept

NOTE is a local production partner with a multinational platform for manufacturing electronics-based products that require high technology competence and flexibility across large parts of product lifecycles.

Business goals and strategy

NOTE will be the best collaboration partner in the sector with high delivery precision and quality for a competitive total cost.

To achieve the market's most competitive offering, NOTE should achieve good profitability, actively contribute to ensuring safeguarding the customer's delivery chain and sharpen competitiveness through flexibility, competence and professional conduct.

Financial goals

Growth goal NOTE will increase its market shares organically and through acquisitions.

Profitability goal

NOTE will grow with profitability. Its goal is for a minimum return of operating capital of 20 percent. For the long term and over a business cycle, profitability will also exceed the average of other mid-sized international and comparable competitors.

Capital structure goal The minimum equity ratio should be 30 percent.

Dividend goal

Dividends should be adapted to average profit levels over a business cycle, and for the long term, be 30–50 percent of profit after tax. Dividend should also be usable for modifying the capital structure.

Business model

NOTE is a specialised manufacturing partner for producing electronics-based products in small to medium series that require high technology competence and flexibility (high mix/low volume). NOTE produces PCBs, sub-assemblies and box build products. Its business offering builds on delivering flexible solutions based on the customer's and product's needs right through product lifecycle from design to after-sales, and for a strong total offering.

A manufacturing partner with a strong total offering

NOTE's business model starts from a holistic view and consists of two central components: Nearsourcing centres close to customers and Industrial Plants in Eastern Europe and Asia. NOTE's focus is to deliver customers the right product at the right time, for a competitive cost. Cost of materials represents most of the total cost of a finished product. One important task for NOTE is to offer competitive pricing of electronic components and other production materials, plus effective logistics solutions.

NOTE's offering is especially focused on the high mix/low volume segment, which entails high flexibility in production and good product documentation. This route contributes to somewhat more stable market progress through longer product lifecycles and long-lasting customer relations. NOTE's customers are mainly in the engineering and communication industries, which in the latter, include complex systems for monitoring, amplification and security.

In box build products, NOTE has the capacity to deliver electronic and mechanical solutions in tandem in close collaboration between the customer and the affected units of NOTE. Usually, distribution is then direct to end-customers.

To sharpen competitiveness, NOTE puts a sharp focus on continuously monitoring and improving the company's business processes, to thus enhance efficiency, delivery precision and quality.

Nearsourcing creates the right conditions from the start

NOTE's Nearsourcing centres work on creating and enhancing NOTE's customer relations. Production technology engineering services focusing on the early phases of product lifecycles are conducted at Nearsourcing centres in Sweden, Norway, Finland and the UK, supporting the customer on design and development, selecting materials, producability analysis and developing and testing equipment, with the consistent aim of creating the best feasible product and production process for the customer. Product prototypes and pilot series are also produced to determine the product's final design. Nearsourcing centres offer services for complete product lifecycles, which also cover the industrialisation of production processes, series production and logistics and after-sales solutions, consistently conforming to customer needs.

The geographical closeness Nearsourcing centres offer customers in Sweden, Norway, Finland and the UK is highly significant when projects require ongoing contact and an extensive exchange of know-how between parties. Nearsourcing also shortens product times to market, i.e. the time from original idea to the product reaching its final market, which reduces capital tied-up and offers competitive edges on the market.

NOTE's level of service and flexibility is high, and work during the critical early phases is in close interaction with customers. Nearsourcing enables high flexibility in the introduction phase for customers, before the product or the market are ready for series production. Meanwhile, NOTE's overall understanding of the product and its lifecycle, combined with highly developed sourcing competence, offer good prospects of controlling production and the supply of materials so that the overall cost is favourable. In this way, NOTE creates value-added for customers by avoiding a lot of the costly mistakes and re-thinks.

Customer needs determine the location of series production, at a Nearsourcing centre or Industrial Plant. Needs may vary based on the customer's in-house competences, cost structure, the location of the product in its lifecycle, volume and geographical final market.

Cost-effective volume production at Industrial Plants

NOTE's labour-intensive high-volume production is essentially located at its Industrial Plants in Estonia and China, and with a collaboration partner in Poland. Products and production processes are industrialised at Industrial Plants in collaboration with Nearsourcing centres, according to customer needs. These plants have

advanced production equipment and a high level of engineering competence. NOTE also has a well-developed methodology for relocating production between Nearsourcing centres and Industrial Plants. These units work together in dedicated customer teams to monitor and track materials and information flows, and to offer continuous feedback to customers.

NOTE's offering covers the whole value chain. Customers can get assistance on selected links or let NOTE manage everything from design to after-sales services.

* New Product Introduction, a highly developed business process for customers on the verge of launching a new product on the market. NOTE actively supports the customer through this process bringing experience and know-how in selecting materials, sourcing, testing, production, quality and logistics.

Market and competitors

NOTE operates on the market for outsourced electronics production.

Background

Europe is a unique region on the global market for manufacturing services. Comparisons with the rest of the world show that there is no other continent with so many high-cost countries adjacent to countries with significantly lower cost levels. This has affected the structure and evolution of the European market. The European part of the sector started in developed Western high-cost countries like France, Germany, Ireland, Sweden and the UK. Proceeding from these countries, the sector migrated east, starting up operations in lowcost countries like the Czech Republic, Estonia, Hungary, Lithuania and Poland. These units were started up to produce more cost-efficiently for Western European final markets.

The European market consists of domestic European players and major global corporations, and the majority of European players are smaller domestic companies with long histories, linked primarily to one or a few customers. Many of the global players starting up in Europe have located their operations in Eastern European countries.

Generally, the value Western European countries bring their customers can be considered as specialist services, while the value from players in Eastern Europe is linked to low-cost manufacture.

The market in 2010

The year started in the same way as 2009 concluded, with stabilised demand, albeit at a fairly low level in volume terms. An upturn in demand was apparent in the second quarter. Progress gradually accentuated through the autumn.

In terms of the supply of components, the global market featured problematic shortages and long-lead times right through the year. The situation was also exacerbated when demand increased gradually through the year. This shortage had consequences in the form of delivery delays and increased costs.

Market trends, drivers and prospects

The market for outsourced electronic production has emerged and evolved as a consequence of greater interest in outsourcing and greater underlying demand for manufactured products. The market experienced a sharp slump in volumes during the global recession of 2008–2009, linked primarily to a substantial demand downturn at the end-customer level. The market now appears to have recovered to something more closely resembling normalised levels.

The market has undergone fundamental change in recent years. The most important drivers being price pressure on components, requirements for greater speed from idea to finished product, a higher share of outsourcing and strong economic progress in growth regions with the emergence of new final markets as a result. One driver gaining ground recently is a greater willingness to find climate-intelligent alternatives in segments including the selection of materials, packaging and transportation. Another consequence is that increasingly, production is close to final markets.

High growth in Asia, and especially China, has favoured domestic consumption. In turn, this has triggered new demand for final products previously produced for export to Europe and the US. These new opportunities have also contributed to a still higher rate of change on the market, because increasing numbers of global corporations are now establishing long-term presences in Asia. This progress is expected to continue through the coming years. Of the major economies, India is expected to make similar progress to China, with more international investment.

Sector commentator iSuppli estimates that the overall market for outsourced electronics production will grow by some 7 percent annually through the coming years.

The European market is regarded as stagnant or growing weakly, which suggests that the primary drivers will remain the search for cost-efficient production and rationalisation. In geographical terms, this means there is still scope for production transfers from west to east.

The market can be divided into segments in a range of perspectives, but often, the sector refers to:

• Low mix/high volume. These products (such as mobile phones and TV sets) are often consumer products. In this segment, products are most often produced and sold in very high volumes with minimal changes to product design. Usually, product lifecycles are fairly short.
• High mix/low volume. These products (such as communication infrastructure, control systems, measurement instruments) are often industrial products, i.e. components that customers often embed into original products. The demand and level of adaptation varies, setting higher standards for the flexibility of the producing partner. The product lifecycles of industrial products are generally longer than for consumer products.

Outsourcing

NOTE judges that the share of the corporate outsourced production will continue to increase structurally over time. Globalisation and progressively accentuating competition means optimising core business and achieve shorter lead-times will become more important. This means that businesses need a strong and competent partner in segments like product development, supply chain, industrialisation, box build products and after-sales services. By turning to NOTE, customers get access to all this competence, simultaneous with costs being shared with other customers. Outsourcing frees up capital so that companies can focus on their core business.

Customer structure and regional split

NOTE's customer base consists of global corporations active on the world market and local customers that have their primary sales in northern Europe.

NOTE is perceiving increased demand for production in China. The market's view of outsourcing to China has become more nuanced, which has resulted in more suitable projects being located there, for example depending on products' geographical final markets. NOTE's operation in China was

started up a few years ago and is very well equipped to manage production transfers from Europe and new production start-ups.

For small and mid-sized customers that are locally based, NOTE has put a big emphasis on creating flexible concepts that suit companies with growth ambitions that want to start up on new markets. This customer category has pressing needs for competence on the introduction of new products, effective purchasing and opportunities to find cost-efficient production at a reasonable distance from their final market.

Examples of customers that NOTE started up new partnerships with in the year include Bravida Fire & Security, Cleanergy, Hernis, Micronic Mydata and Telespor.

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

Competitors

Some of NOTE's larger competitors active on the Nordic market are Enics, Kitron and Partnertech. In addition, there is a range of smaller, often niche players, active on local markets.

Electronics manufacturing services—global sales of industrial electronics, USD m

Electronics manufacturing services—total global sales of outsourced manufacturing, USD m

Source: iSuppli

What they are saying about NOTE

A selection of quotes from the media and NOTE's customer news magazine in 2010:

Trigentic selects NOTE for its power, communication and automation systems in a single product.

"NOTE demonstrated secure and stable commitment when we were developing the product. NOTE was really helpful and skilled in terms of the various component choices that we needed to create a complete product. When it was then time to transfer to the production phase, NOTE demonstrated its very good production control and quality-assurance. We are looking forward to a continued positive collaboration with NOTE."

Henrik Niklasson, Technical Manager at Trigentic, reviews the reasons for selecting NOTE as a supplier. Evertiq, 27 May.

Hernis selects NOTE for a new camera station

"NOTE possesses competence from a lot of different segments and was able to offer competitive pricing. The fact they had further capacity in China was also important to our decision, because we expect volumes of this product to increase, and then we can cut the costs of production and components. They were also really skilful during the tendering process when we needed to find out more about PEEK, a new plastic that we did not have previous experience of. Overall, they offered us great support in terms of finding good subcontractors for different specialist needs. Once we have a stable production process in place, we expect to transfer production to China. We think NOTE has the right experience and they have achieved good transfer processes for other customers. The collaboration with NOTE has been a very positive experience because they have been focused on taking the process forward all the time. We are looking forward to a long and fruitful collaboration where we can develop together as customer and supplier."

Ole Iver Rusten, Purchasing Manager at Hernis, expresses his view of why Hernis chose NOTE as its supplier. Evertiq, 12 April.

Crem International chooses production in China and Sweden

"We have got a perfect match in NOTE because we have got good contact with their plant in Tangxia, while we get the support we need from the plant here in Sweden. We can talk to each other globally and locally. So we view NOTE as a long-term partner in electronics and hardware for our machines."

Mikael By, Group Head of Crem International Production, Sourcing and Development, gives his view on choosing to locate production in China and Sweden. Elektronik i Norden, 9 April.

Trimble deepens its partnership with NOTE and transfers production of PCBs to China

"Because we had had a good collaboration with NOTE for an extended period, we wanted them to be part of our screening process. NOTE clearly demonstrated that their different units around the world operated as a single global entity, that could satisfy our needs as a global group. They had the right pricing and demonstrated a strong transfer process. We got the transfer to China underway in February this year, and it is looking good. In communication terms, things have gone really well. NOTE has a fast-working and ambitious team in China. In purely cultural terms, things are really very easy to manage because the most important key staff at the plant speak English."

Anders Mattsson, Purchasing Manager at Trimble AB, speaks about the screening process and collaboration with NOTE. Transfer, issue 2, 2010.

Risk management

Operational risks

Risk	Exposure and management
Customers The risk that a customer leaves NOTE or does not fulfil its obligations.	NOTE has a large number of active accounts, the 15 largest in sales terms represent over 50 percent 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 achieve economies of scale and limit material commit ments 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. Credit checks are conducted on new customers, and usually, materials risk is regulated through agreements with customers. NOTE follows up on this continuously.
Environmental risks The risk that operations cause damage to the environ ment and costs for complying with new more stringent environmental directives.	Unlike the heavy engineering industry, NOTE's business has a fairly limited environmental impact. To comply with applicable environmental legislation, NOTE has essentially transferred to lead-free production, 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 the selection of material land production in accordance with the customer's produc tion specification. Usually, the standards applying to NOTE's documentation of services rendered are extensive and can be considered complex. Quality monitoring of suppliers and NOTE's production is a continuous process. Where possible, NOTE arranges insurance cover to minimise any damage caused by production faults.
Economic and seasonal variations	The market for outsourced electronics production is relatively young and usually considered fairly cyclical. Of the somewhat larger traditional 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. NOTE sells to a large number of customers, who essentially, are active in the engineering and communication industries in the Nordics and UK. The 15 largest customers in sales terms represent over 50 percent of consolidated sales. The intention is for the focus on customers in the industrial segment to lead to more stable demand growth and relatively longer product lifecycles and customer assignments.
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, with a certain delay, NOTE can transfer production from one unit to another, and have its units interact on production, which limits its risks from long-term production downtime. NOTE has insurance cover to minimise the loss of contributions caused by production downtime.
Competence The risk of not possessing sufficient competence in all parts of business.	NOTE's sophisticated operations require high technical competence across several segments. NOTE endeavours for staff to achieve continuous competence development.
IT IT-related disruptions can cause production downtime, loss of invoicing or reduced efficiency in administration and sales.	NOTE's operations require IT systems that work well. NOTE has a selection of local applications and operating environments with varying functionality and capacity. To improve availability, cost-efficiency and business support, NOTE conducts initiatives to increasingly transfer operations to an external provider, and review its prospects of implementing more standardised IT systems.
Capacity risk The risk of not having sufficient capacity in plants.	NOTE has satisfactory production capacity. Because production is of a similar nature in several of the group's units, NOTE also has the prospects of transferring production from one unit to another, subject to some delay, and for its units to interact in production.
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 percent of sales. Sourcing on its customers' behalf is normally formalised through agreements with customers. Considering the complexity of electronics production and variations in demand, there is a close collaboration with customers to limit the risk of obsolescence in inventories.

Financial risks

Risk Exposure and management

Currency

Currency risk means that a fluctuation in exchange rates affects 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.

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.

Against the background of an increasing share of value-added being generated in foreign units and the purchasing

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 accounts receivable—trade and inventories.

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 profitability and cash flow.

Quality, environment and ethics

Sustainability issues are integrated into NOTE's business activities and affect all units. Segments covered are quality issues, environmental impact, business ethics and human rights. This work is decentralised and coordinated using collective goals, guidelines and key performance indicators.

The complete picture raises standards

Taking an integrated approach to different sustainability 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, to locating manufacture close to final markets, so that the adverse environmental impact of transportation is minimised. In tandem with improving customers' impact on the environment and society, NOTE conducts its own initiatives to minimise the group's negative impact on its surroundings.

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 in the endeavour of constantly addressing the customer's current standards and expectations.

The organisation works towards shared and measurable goals. For example, delivery precision and delivery quality are 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. All NOTE's plants 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.

Examples of NOTE's quality work

NOTE's units collaborate to identify improvements and learn from each other. A new collective fault management system was tested in Sweden in 2010. This system was introduced at yearend 2010, and experiences garnered from it will be gradually disseminated to different units of the group. A project preparing for a collective quality and environmental system has also been commenced.

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's plants sort waste at source and measure components with an environmental impact such as electrical

Delivery precision. NOTE's delivery precision has improved progressively in recent years. However, there was a setback in 2010 due to acute shortages of many components on the market. Average delivery precision for 2010 was 87 (90) percent. NOTE judges that delivery precision is at a generally high level compared to other players in the high mix/ low volume segment.

Customer returns. For an extended period, NOTE has been tracking its key performance indicators and other information regarding returns to further improve its quality outcomes. In 2010, NOTE achieved an average of 1,923 returned products per million produced units. This is an improvement of 36 (46) percent compared to the previous year.

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 the Swedish units are stated on NOTE's website. Environmental work also follows international ISO guidelines. The main series in the environmental segment is ISO 14000, and to date, seven of the group's nine 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.

Examples of NOTE's environmental work

NOTE's first plant, NOTE Norrtelje, started methodical environmental work back 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 combustible waste is compacted to minimise the amount of waste transportation. This work features continuous rationalisation and improvement.

In the environmental segment, it is necessary to demonstrate compliance with applicable environmental legislation.

All NOTE's Swedish units collectively run ongoing collaboration projects to create relevant management and collective measurement routines to ensure compliance with the standards of environmental legislation.

These units also have a highly developed system for exchanging best practice, sharing good examples and proposals. One concrete example is an environmental project conducted collectively by the units, dealing with freighting. NOTE is endeavouring to minimise its energy consumption and

CO2 emissions by co-ordinating its haulage contractors and optimising loads and deliveries.

Ethics

NOTE endeavours 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

2010 was a challenging year for many of NOTE's employees. The measures executed to adapt NOTE's cost base as a consequence of the market downturn in 2009 were implemented with care for the people affected.

Progress in 2010

NOTE's communicated restructuring program was executed in 2010, and its units at Skänninge, Tauragé and Gdansk closed in the year. In addition, NOTE sold its 50 percent participating interest in joint venture NOTEFideltronik to its former partner and also principal owner of Fideltronik.

In addition to these major changes, NOTE also commenced a review of its business processes and a raft of actions were executed to further reduce its personnel expenses. Staff in manufacturing and central functions and administration were affected. A number of employees working in CAD (PCB design) and the NOTEfied preferred parts database had their employment conditions changed through these operations transferring to a new company, with NOTE as a minority shareholder.

Accordingly, to reduce costs, NOTE executed a series of measures that were highly significant to employees of the group. The measures executed varied between countries depending on the laws, cultures and social security systems.

Notices, lay-offs and agreements on shorter working-hours were implemented. Agreements on flexible working-hours and temporary employment were used where appropriate. Several measures will also be used going forward to create flexibility for fluctuations in order flows and similar events. At the end of 2010, just over half of NOTE's people were employed in low-cost countries. Against the background of the operation in China being conducted in a wholly owned NOTE subsidiary from year-end 2009, the average number of employees of the group was largely unchanged compared to the previous year.

Diversity and equal opportunities

Diversity and equal opportunities are not merely internal issues, but also feature in NOTE's relationships with its customers and suppliers. All NOTE's people have collective responsibility for diversity and equal opportunities issues being a natural part of operations.

A good working environment is fundamental to good performance at work and a prerequisite for productivity, efficiency and the quality of operations.

Work on the working environment is conducted locally by NOTE units.

Leadership

Big changes require good leadership. NOTE's fundamental view of leadership is to delegate responsibility as far as possible, while NOTE's central functions offer support by specifying requirements, guidelines and measurement.

Employees	2010	2009
Average number of employees	1,000	977
Number of women	511	470
Number of men	489	507
Work attendance, %	95.3	96.4
Staff turnover, %	9.9	3.6

Employees at year-end

Organisation and group management

The group is organised in accordance with the company's strategy with a sharp focus on creating the prospects for group-wide collaboration and continuous improvement.

Organisation

The NOTE group's parent company and management are stationed at Danderyd, near Stockholm.

NOTE has a decentralised organisational structure and each Nearsourcing centre is responsible for sales and delivery to customers. Industrial Plants serve as resource units for cost-efficient production.

Peter Laveson CEO & President. Born in 1973. Board member and employed by NOTE since 2010. NOTE holdings: 10,000 shares, 0 options.

Henrik Nygren CFO. Born in 1956. Employed by NOTE since 2006. NOTE holdings: 30 000 shares, 60,000 options.

Robert Rosenzweig COO. Born in 1967. Employed by NOTE since 2010. NOTE holdings: 0 shares, 0 options.

Five-year summary

SEK m Summary Consolidated Income Statement	2010	2009	2008	2007	2006
Net sales	1,210.7	1,200.1	1,709.5	1,743.8	1,741.5
Gross profit/loss	60.5	26.4	123.0	224.6	206.5
Operating profit/loss	–48.2	–90.8	–3.8	111.9	103.6
Profit/loss after financial items	–59.4	–97.9	–14.4	103.8	96.2
Profit/loss after tax	–62.0	–81.0	–13.1	78.2	68.6
Summary Consolidated Balance Sheet
ASSETS
Non-current assets	180.9	234.6	247.1	200.6	167.7
Current assets	512.6	518.5	701.2	747.5	720.5
TOTAL ASSETS	693.5	753.1	948.3	948.1	888.2
EQUITY AND LIABILITIES
Equity	217.0	209.9	294.9	327.4	268.1
Non-current liabilities	7.1	30.5	98.4	140.1	157.9
Current liabilities	469.4	512.7	555.0	480.6	462.2
TOTAL EQUITY AND LIABILITIES	693.5	753.1	948.3	948.1	888.2
Cash flow, group
Cash flow from operating activities	–25.6	42.6	83.2	48.3	46.8
Cash flow from investing activities	12.0	–18.7	–58.1	–48.8	–22.0
CASH FLOW	–13.6	23.9	25.1	–0.5	24.8
Cash and cash equivalents at beginning of period	24.4	35.9	38.5	18.8	9.1
Cash flow before financing activities	–13.6	23.9	25.1	–0.5	24.8
Cash flow from financing activities	25.4	–34.6	–30.1	19.8	–15.0
Exchange rate difference in cash and cash equivalents	–2.5	–0.8	2.4	0.4	–0.1
CASH AND CASH EQUIVALENTS AT END OF YEAR	33.7	24.4	35.9	38.5	18.8
Consolidated key figures
Margins
Operating margin, %	–4.0	–7.6	–0.2	6.4	5.9
Profit margin, %	–4.9	–8.2	–0.8	6.0	5.5
Returns
Return on operating capital, %	–12.1	–18.8	–0.7	21.4	22.5
Return on equity, %	–29.1	–32.1	–4.2	26.3	29.0
Capital structure
Operating capital (average)	398.4	483.6	548.7	521.9	459.9
Interest-bearing net debt	142.7	239.9	247.2	246.3	223.4
Equity to assets ratio, %	31.3	27.9	31.1	34.5	30.2
Net debt/equity ratio, multiple	0.7	1.1	0.8	0.8	0.8
Interest coverage ratio, multiple	–3.4	–10.0	–0.1	7.1	12.3
Capital turnover rate (operating capital), multiple	3.0	2.5	3.1	3.3	3.8
Market capitalisation
Market capitalisation at end of period	240	205	217	698	808
Employees
Sales per employee, SEK 000	1,211	1,228	1,423	1,489	1,545

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

Financial definitions

Market capitalisation

Share price multiplied by total number of outstanding shares

Equity per share

Equity divided by 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, 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

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 divided by 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 and interest-bearing receivables.

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.

Share data and shareholders

The year 2010 was NOTE's seventh on the stock market. A rights issue was conducted in the second quarter and the number of shareholders increased by four percent in the year to 2,568 (2,475).

Share price performance

NOTE's share price was SEK 8.30 (10.20) at the end of the year, a decrease of 19 percent. The high in the year was SEK 11.45, on 9 and 14 April. The low of the year of SEK 6.10 was on 26 August. The stock exchange OMXSSCPI index increased by 22 percent in the year.

At the end of the year, NOTE's market capitalisation was SEK 240 (205) m.

Turnover

17,583,508 NOTE shares were traded in the year, corresponding to a rate of turnover of 88 percent. An average of 91,838 shares were traded per day.

Rights issue

An Extraordinary General Meeting (EGM) in April 2010 resolved to approve the Board of Directors' proposal on a guaranteed rights issue. The share issue, of SEK 87 m gross, was conducted in the second quarter, with preferential rights for NOTE's shareholders. The issue was conducted to strengthen NOTE financially for its ongoing structural transformation, and to exploit growth opportunities on the market.

The rights issue was some 50 percent oversubscribed, and its underwriting guarantees were not required. The new issue means that the number of shares and votes of NOTE increased by 19,248,400 in May. After the new issue, there are a total of 28,872,600 shares and votes of the company.

Trading

Quotation	NASDAQ OMX Stockholm
Segment	Small Cap
Sector	Information Technology
Short name	NOTE
ISIN code	SE0001161654
Number of shares as of 31 December 2010	28,872,600

Dividend

NOTE's judgement is that the future growth and profitability potential of operations is positive. Considering profit performance in the year, the Board of Directors is proposing that no dividends are paid for the financial year 2010.

Share capital history

Year	Transaction	Increase in no. of shares	Increase of share capital (SEK)	Total no. of shares	Total share capital (SEK)	Quotient value (SEK)
1990	Incorporation	3,000	300,000	3,000	300,000	100.00
2000	Bonus issue	27,000	2,700,000	30,000	3,000,000	100.00
2000	Split 10:1	270,000	–	300,000	3,000,000	10.00
2002	New share issue	84,000	840,000	384,000	3,840,000	10.00
2003	New share issue	15,000	150,000	399,000	3,990,000	10.00
2004	Split 20:1	7,581,000	–	7,980,000	3,990,000	0.50
2004	Option exercise	310,200	155,100	8,290,200	4,145,100	0.50
2004	New share issue	1,334,000	667,000	9,624,200	4,812,100	0.50
2010	New share issue	19,248,400	9,624,200	28,872,600	14,436,300	0.50

10 largest shareholders as of 31 December 2010, by holding

Name	No. of shares	Proportion of capital/ votes, %
Investment AB Öresund	3,195,748	11.07
Avanza Pension	2,579,480	8.93
Garden Growth Capital LLC	2,090,000	7.24
Banque Carnegie Luxembourg SA	1,660,802	5.75
Nordnet Pensionsförsäkring AB	1,419,285	4.92
MGA Placeringar AB	1,409,441	4.88
Kjell-Åke Andersson with family	1,385,040	4.80
Catella Fondförvaltning	1,339,019	4.64
Friends Provident Intl	909,500	3.15
Danica Pensionförsäkrings AB	489,379	1.69
Total	16,477,694	57.07

Division by size, holdings by shareholder as of 31 December 2010

Size of holding	No. of shareholders	No. of shares	Proportion of capital/ votes, %
1–500	1,007	199,784	0.69
501–2,000	754	827,445	2.87
2,001–5,000	389	1,323,880	4.59
5,001–20,000	294	2,908,587	10.07
20,001–50,000	68	2,264,788	7.84
50,001–500,000	47	6,193,241	21.45
500,001–5,000,000	9	15,154,875	52.49
Total	2,568	28,872,600	100.00

NOTE Annual Report 2010 29

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.

Articles of Association

The Articles of Association are approved by the Annual General Meeting (AGM) and shall include a number of mandatory duties of a more fundamental nature in accordance with applicable legislation. The Articles of Association state items including the company's registered office, operations, the size of the Board of Directors, the amount of share capital,

the number of shares and how the AGM is convened.

Shareholders

At the end of 2010, NOTE had one shareholder representing more than one-tenth of the voting rights for shares of the company, Investment AB Öresund, representing 11.1 percent. For more information on the share and shareholders, see The NOTE share on pages 26–27.

Annual General Meeting

The AGM is the company's chief decision-making body, where shareholders exercise their voting rights. All shareholders recorded in the share register on the record date, and that have notified the company of their participation in time, are entitled to

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 and information on insiders.

participate in the Meeting and vote for their total holdings of shares, personally or by proxy. Each share corresponds to one vote. Individual shareholders that wish to have a matter considered at the AGM can request this with NOTE's Board of Directors at the address published on the company's website, in good time before the meeting. Resolutions of the AGM are published after the Meeting in a press release and a report from the Meeting is published on the website www.note.eu. The company's AGM will be held in Danderyd, Stockholm or Norrtälje, Sweden.

The AGM should be held within six months of the end of the financial year. The AGM considers matters relating to items including dividend to shareholders, adopting the Income Statement and Balance Sheet, discharging the Board members and CEO from liability, electing Board members, the Chairman of the Board and Auditors, and approving the guidelines for remunerating senior management and fees for the Board of Directors and Auditors.

Extraordinary General Meeting 2010

On 7 April 2010, NOTE held an EGM at its head office in Danderyd, Sweden. Shareholders representing a total of 33.1 percent of the capital and votes attended the Meeting.

This Meeting approved the Board of Directors' proposal on a guaranteed rights issue of shares. The meeting also resolved to amend the articles of association in terms of the limits for capital and the limits of the number of shares with the aim of enabling a new share issue. For more information on the rights issue, see The NOTE share on pages 26–27.

Annual General Meeting 2010

NOTE's AGM was held on 27 April 2010 at Spårvagnshallarna in Stockholm, Sweden. Shareholders representing a total of 41.3 percent of the capital and votes attended the Meeting.

Nomination Committee members for the AGM 2011

Nomination		Proportion of capital/votes, %
Committee member	Representing	30 Sep. 10	31 Dec. 10
Stefan Charette	Investment AB Öresund	10.57	11.07
Bruce Grant	Garden Growth Capital LLC	5.07	7.24
Christer Sandberg	Banque Carnegie Luxembourg SA	6.56	5.59
Ulf Strömsten	Catella Fondförvaltning	5.49	4.64

The Meeting resolved on matters including re-electing and electing Board members and approving fees in accordance with the Nomination Committee's proposal, and not to pay any dividends to shareholders for the financial year 2009.

Nomination Committee

The AGM resolves on how the Nomination Committee is appointed. The AGM 2010 resolved that the Nomination Committee ahead of the forthcoming AGM shall be formed by the four largest shareholders that wish to participate, each appointing a representative at least six months before the AGM, with the Chairman of the company's Board of Directors serving as convener. 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.

The duty of the Nomination Committee is to consult on, and submit proposals to, the AGM regarding:

• Election of a Chairman of the Meeting.
• Election of the 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 2011. 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 through 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 ongoing contact with the group management, and for ensuring that the Board's decisions are implemented appropriately.

NOTE's Board of Directors has six members. The Board of Directors has a general composition of sector knowledge and competence from Board work and management of listed companies as well as finance, accounting, structural change and strategic development.

The AGM 2010 re-elected Bruce Grant and Göran Jansson, and elected Kjell-Åke Andersson, Stefan Charette, Henry Klotz and Peter Laveson as Board members for the period until the next AGM. Stefan Charette was elected as Chairman of the Board. One employee representative is a member of the Board.

Work of the Board of Directors in 2010

Each scheduled Board meeting conducts a review of operations, 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 14 Board meetings where minutes were taken in the year. 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.

Audit Committee

The members of the Audit Committee are appointed at the Board meeting following election for one year at a time. The Audit Committee has consisted of the whole Board since the Board meeting following election of 2010. One of its members, Peter Laveson, became NOTE's CEO and President in summer 2010, and accordingly, has had a dual role as a Board member and CEO since.

The duties of the Audit Committee are to:

• Work on quality-assuring financial reporting.
• Discuss the audit and the view of the company's risks with the Auditor.
• Following up on external Auditors' reviews and appraising their work.

• Set 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.

The Board of Directors has a close and regular 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 2010, members of the Board of Directors held two 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.

During the financial year, the whole Board of Directors discussed audit issues at four meetings and monitored compliance with adopted guidelines. The following main issues were considered:

Following up on the Auditor's reporting on the financial statement and ongoing reviews.

• Appraisal of the Auditor's audit effort in the year.
• Discussion of the company's structure.
• The internal control function's results of its reviews, with a special focus on valuations of inventories and goodwill and auditing foreign subsidiaries this year.
• Discussions on the liquidity and financing situation: especially in tandem with the new share issue.

Remuneration Committee

The members of the Remuneration Committee are appointed at the Board meeting following election for one year at a time. The Remuneration Committee consists of the whole Board since the Board meeting following election in 2010. Because one of the members, Peter Laveson, became NOTE's CEO and President in the summer, he has not participated in work on remuneration for the CEO since then.

		Independence
Board of Directors 2010 Board member	Position	In relation to company and management	In relation to company's major shareholders
Stefan Charette (elected 27 April 2010)	Chairman	Yes	No*
Kjell-Åke Andersson (elected 27 April 2010)	Member	Yes	Yes
Bruce Grant	Member	Yes	Yes
Göran Jansson	Member	Yes**	Yes
Henry Klotz (elected 27 April 2010)	Member	Yes	Yes
Peter Laveson (elected 27 April 2010)	Member	No***	Yes
Bo Andersson (resigned 27 April 2010)	Member	Yes	Yes
Håkan Gellerstedt (resigned 27 April 2010)	Member	Yes	Yes
Göran Gezelius (resigned 27 April 2010)	Member	Yes	Yes
Per-Arne Sandström (resigned 27 April 2010)	Member	Yes	Yes
Göran Sigfridsson (resigned 27 April 2010)	Member	Yes	Yes
Jimmy Almevind (resigned 30 June 2010)	Employee representative, member	Yes	Yes
Christoffer Skogh	Employee representative, member	Yes	Yes
Andreas Ollén	Employee representative, deputy	Yes	Yes

* Employed by Investment AB Öresund, which is one of NOTE's major shareholders.

** Not independent when he was acting CEO and President of NOTE in the period 24 January–16 July 2010.

^*** Not independent since he became CEO and President of NOTE on 16 July 2010.

The duties of the Remuneration Committee are to:

• Consult on decisions in matters of remuneration principles, remuneration and other employment terms for management.
• Monitor and evaluate ongoing programs and programs concluded in the year for performance-related pay for management.
• Monitor and evaluate application of the guidelines for remuneration to senior management that the AGM has resolved on and applicable remuneration structures and remuneration levels in the company.

In the financial year, the Board of Directors discussed remuneration issues at two meetings and monitored compliance with adopted guidelines. The following main issues were considered:

• Evaluation and approval of remuneration structures for staff and pay reviews for management.
• Discussion and setting of remuneration for the CEO/President and the company's COO, who was hired in the year.
• Discussion regarding competence, remuneration and job descriptions.

After an evaluation, the Remuneration Committee concluded that:

• NOTE is following the guidelines for remunerating senior management that the AGM 2010 resolved on.
• Applicable remuneration structures and levels are reasonable against the background of the company's operations.
• No performance-related pay programs for senior managers were concluded in 2010. However, the CEO is eligible for performance-related pay based on the company's profit performance at a maximum of 100 percent of basic salary, until the midpoint of 2011.

Guidelines for remuneration and other benefits for senior management

For information on these guidelines, refer to the Formal Annual Accounts on page 38.

The group's operational governance

Chief Executive Officer NOTE's CEO leads ongoing operations.

This responsibility covers accounting issues, monitoring the group's strategies and business performance and ensuring that the Board of Directors receives the necessary information to be able to take 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, informing them on how operations are progressing based on the decisions they have taken. For more information on the CEO, see Operations on page 23.

Group management

The group management of NOTE consists of three members who have ongoing responsibility for different parts of operations.

This responsibility covers the design and implementation of the group's overarching strategies. During the financial year, the group management held regular meetings to review results of operations, the conditions of operations and strategic and operational issues. For more information on group management, see Operations on page 23.

Governance of subsidiaries

Attendance statistics

Subsidiaries' operations are monitored monthly from a series of targets, including operating profit, working capital and cash flow.

Attendance and remuneration to the Board of Directors

Board of Directors
Board member	Position	Board meetings	Remuneration Committee	Audit Committee	Directors' fees, SEK
Stefan Charette (elected 27 April 2010)	Chairman	7/14	1/2	6/6	200,000
Kjell-Åke Andersson (elected 27 April 2010)	Member	7/14	1/2	4/6	100,000
Bruce Grant	Member	13/14	2/2	4/6	100,000
Göran Jansson	Member	14/14	2/2	6/6	78,345
Henry Klotz (elected 27 April 2010)	Member	7/14	1/2	4/6	100,000
Peter Laveson (elected 27 April 2010)	Member	7/14	1/2	4/6	21,655
Bo Andersson (resigned 27 April 2010)	Member	4/14	1/2	–	–
Håkan Gellerstedt (resigned 27 April 2010)	Member	6/14	1/2	–	–
Göran Gezelius (resigned 27 April 2010)	Member	7/14	1/2	–	–
Per-Arne Sandström (resigned 27 April 2010)	Member	7/14	1/2	–	–
Göran Sigfridsson (resigned 27 April 2010)	Member	7/14	1/2	–	–
Jimmy Almevind (resigned 30 June 2010)	Employee representative, member	7/14	1/2	–	–
Christoffer Skogh	Employee representative, member	13/14	2/2	4/6	–
Andreas Ollén	Employee representative, deputy	13/14	2/2	4/6	–

Fees are for the mandate term May 2010 to April 2011, resolved by the AGM 2010. No fees for committee work were payable to the current Board of Directors.

Internal controls and risk management

The Board of Directors is responsible for internal controls of the company in accordance with 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 managed 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 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. NOTE also has a procedure for formalising 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.

Updating guidelines and limits regarding risk assessments is conducted at least yearly. For more information on risks and risk management, see Operations on page 17 and note 25, Financial risks and finance policy on page 55.

Monitoring control activities

Against the background of an increasing share of production being conducted in NOTE's international units, the methodology for measuring profitability and reporting working capital was enhanced in the year. Each unit within NOTE is monitored in a monthly review by group 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.

Board of Directors and Auditors

Stefan Charette Chairman, elected in 2010.

Born in 1972.

Education: M.Sc. in Finance and B.Sc. (Eng.)

NOTE holdings*: 484,326 shares.

Other significant assignments: CEO of Investment AB Öresund. Chairman of the Board of Athanase Capital Partners AB, Concentric AB and Global Batterier AB. Board member of Haldex AB.

Professional experience: Former CEO of AB Custos and Brokk Group. Adviser to multinational groups for Lehman Brothers and Salomon Smith Barney. Chairman of the Board of Johnson Pump AB, Johnson Pump Marine AB and Tigerholm Products AB. Board member of AB Custos and Brokk AB.

Kjell-Åke Andersson

Board member, elected in 2010. Born in 1946.

Education: B.Sc. (Eng.)

NOTE holdings*: 1,385,040 shares.

Other significant assignments: Consultant in corporate management. Chairman of the Board of Cervitrol AB, Domitech AB and MedicPen AB. Board member of Mekatronik Konsult i Lund AB.

Professional experience: 40 years in industry, over 30 years in the EMS sector. Various positions including development engineer, production manager and CEO for companies including Electrolux and NOTE.

Bruce Grant

Board member, elected in 2007. Born in 1959.

Education: Th.D. Cand. and B.Sc. (Econ.)

NOTE holdings*: 2,090,000 shares.

Other significant assignments: Chairman of the Board of Human Care HC AB (publ). Board member of Robust AB, Stille AB 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

Board member, elected in 2007. Born in 1958.

Education: B.Sc. (Econ.)

NOTE holdings: 156,207 shares.

Other significant assignments: CFO and EVP of SAS. Chairman of the Board of Bankit AB and Nwise AB. Board member of Axis Communications AB, Human Care HC AB (publ), Robust AB and Stille AB.

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

Henry Klotz

Board member, elected in 2010. Born in 1944.

Education: Engineer and economist.

NOTE holdings: 0 shares.

Other significant assignments: Executive Vice Chairman of CLS Holdings plc. Chairman of the Board of Catena AB. Board member of Bulgarian Land Development plc and CLS Holdings plc subsidiaries.

Professional experience: Various executive positions in the CLS group including heading up the Swedish operation and responsibility for identifying new business opportunities for the group.

Peter Laveson

Board member, elected in 2010. Born in 1973.

Education: M.Sc. (Econ.)

NOTE holdings: 10,000 shares.

Other significant assignments: CEO and President of NOTE.

Professional experience: Former Investment Manager at Investment AB Öresund. Many years' experience of corporate development and change in Swedish and foreign companies, including AB Custos as Regional Manager for the Nordics, UK and Spain through portfolio company Johnson Pump AB and as a management consultant at US consulting firm Accenture plc.

Employee representatives

Christoffer Skogh

Board member, Employee Representative, Unionen, appointed in 2009. Born in 1975.

Education: Senior high school graduate, social sciences.

NOTE holdings: 500 shares.

Assignment: supplier development, previously held positions in sales, production, sourcing and project management. Employee of a company NOTE acquired in 2000 since 1996, active in trade union in 2001–2005 and from 2009 onwards.

Andreas Ollén

Deputy Board member, Employee Representative, Unionen, appointed in 2009. Born in 1981.

Education: Senior high school graduate, electronics.

NOTE holdings: 0 shares.

Assignment: Production Manager, NOTE employee since 2001, active in trade union since 2005.

* 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

Anders Magnussen

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

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

Report of the Directors

Operations—general

NOTE is one of the leading production partners for outsourced electronics production in the Nordics. NOTE's offering covers the complete product lifecycle, from design to after-sales.

The group consists of the parent company, plus wholly owned subsidiaries in Sweden, Norway, Finland, the UK, Estonia, Lithuania, Poland and China.

Operations in 2010

NOTE was early to realise that substantial business opportunities lie in the high mix/low volume market segment by combining advanced valueadded services close to customers while simultaneously offering production in low-cost countries or close to customers' final markets. Accordingly, NOTE has done extensive work on building a group of acquired enterprises with differing backgrounds, cultures and competence levels, into a cohesive group with a collective customer offering. This remains a time-consuming and challenging task.

After NOTE, like the rest of the business sector, faced a financial crisis, while also losing one key account due to a project generation succession, NOTE was forced to increase the tempo of its restructuring. In spring 2010, NOTE conducted a new share issue with the intention of strengthening its finances ahead of its restructuring and to create better prospects for its future.

Significant events in the financial year

Extensive structural measures executed In the year, NOTE executed extensive structural actions to reduce its costs and increase capacity utilisation. NOTE's operation in Skellefteå, Sweden, was divested at year-end 2009. After transferring production to other units of the group, the plants in Skänninge, Sweden, and Tauragé, Lithuania, were closed down in the summer and autumn

respectively. The operation in Gdansk, Poland, was closed down as planned at year-end 2010.

The sale of NOTE's 50% holding in the NOTEFideltronik electronics plant in Krakow, Poland, was completed at yearend. The purchaser is by NOTE's former partner and joint venturer Zbigniew Fidelus, also principal owner of Polish manufacturer Fideltronik. The sale created a small-scale capital gain in the fourth quarter. In addition, NOTE agreed on a continued production collaboration. Overall, this settlement is expected to reduce future sales by some 5%.

New CEO and President

In July, Peter Laveson became CEO and President. Peter has been a Board member of NOTE since April, and has previous experience as a Business Developer at Investment AB Öresund. Peter has many years' experience of corporate development and change work for Swedish and foreign companies, including AB Custos as Regional Manager for the Nordics, UK and Spain for portfolio company Johnson Pump AB and as a Business Developer at Accenture. Peter replaced Göran Jansson, who was appointed Acting CEO and President in January, succeeding Knut Pogost. Göran has been a Board member of NOTE since spring 2007.

Rights issue 2010

In the second quarter, NOTE implemented a guaranteed new share issue of SEK 87 million gross with preferential rights for its shareholders.

AGM 2010—new Board members The Annual General Meeting (AGM) on 27 April re-elected Bruce Grant and Göran Jansson and elected Kjell-Åke Andersson, Stefan Charette, Henry Klotz and Peter Laveson as Board members. Stefan Charette was elected Chairman—no Deputy Chairman was appointed.

Focusing on NOTEfied

In recent years, NOTE has built up a proprietary preferred parts database that is unique in the sector—NOTEfied. To sharpen its focus, in summer, NOTE decided to organise its CAD (PCB design) operations and NOTEfied into a separate company. In total, this action affected some 20 staff in Sweden, Norway and Poland. NOTE is a partner of this new enterprise. Its principal owner is a Norwegian, Anders G Johansen, who has been key to the build-up of NOTEfied. The purpose of this new constellation is to increase NOTEfied's efficiency and its customer base. The transfer was completed in the fourth quarter of the year and resulted in a small-scale capital gain.

Sales and results of operations Group

Sales 2010

The early part of the year featured some caution from customers. This was due primarily to delays and some uncertainty regarding market progress from several industrial customers. Another strong contributor was an accentuating shortage of electronic components on the global market. Accordingly, volume growth in the fourth quarter was somewhat lower than expected. However, a demand increase was apparent in the second quarter, which became still clearer in the second half-year. For the full year, sales were SEK 1,210.7 (1,200.1) million, an increase of nearly 1%. NOTE Skellefteå's operations, which essentially focused on telecom-related production for NOTE's former largest customer, were divested at year-end 2009. In like-for-like terms, i.e. excluding NOTE Skellefteå, sales increased by 16%.

NOTE sells to a diversity of customers, who essentially, are active in the engineering and communication industries in the Nordics and UK. The 15 largest customers in sales terms represented over 50% of consolidated sales. NOTE's intended focus on customers in the engineering sector will result in more stable demand growth, and relatively longer product lifecycles and customer assignments.

Customer activity and demand from industry increased gradually after the second quarter of the year. At yearend, the group's order back backlog, a combination of firm orders and forecasts, was up some 10% year on year.

Results of operations 2010

In late 2009, NOTE initiated an overhaul of its units. It decided to increase the pace of restructuring in the first quarter by further concentrating the group's production units in Sweden and internationally. Accordingly, extensive structural actions were executed in the year to reduce costs and increase capacity utilisation. A total of some 300 staff were affected by these actions in 2010. However, as a consequence of the previous year's acquisition of the remaining 50% of the shares of the wholly owned IONOTE electronics plant in China, the average number of employees was approximately unchanged on the previous year.

The total cost for the restructuring program is included in loss after tax. With termination costs of over SEK –5 million early in the year for the former CEO and President, the year was charged with structural and non-recurring costs totalling SEK –47 million. Going forward, the savings and rationalisation measures are expected to result in a positive annualised profit effect of over SEK 50 million. Mainly as a result of cost savings executed to date, gross margins adjusted for non-recurring items increased to 8.2% (6.8%).

Through these structural actions executed in the year, capacity utilisation in the group will increase in 2011. The operating loss was SEK –48.2 (–90.8) million. Adjusted for non-recurring costs, the operating loss was SEK –1.4 (–27.1) million, equivalent to an operating margin of –0.1% (–2.3%). Other operating revenue/costs of SEK –5.3 (–4.2) million mainly consist of negative currency effects, and to a lesser extent, capital gains from the sale of the CAD (PCB design) and NOTEfied operation, and the 50% holding in Polish electronics producer NOTEFideltronik.

Net financial income/expense for the period was SEK –11.2 (–7.1) million. Refinancing costs and higher interest costs were only partially offset by reduced net debt. Loss after financial items was SEK –59.4 (–97.9) million, of which non-recurring items represented SEK –46.8 (–63.7) million. The loss after tax was SEK –62.0 (–81.0) million, and was negatively affected by the reversal of deferred tax assets in entities in liquidation.

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 40.5 (45.9) million and mainly related to intra-group services. The loss after tax was SEK –100.7 (18.0) m. The deficit mainly relates to impairment of shares in subsidiaries whose operations were terminated or sold off in the year. As a result of the sale of the CAD/NOTEfied operation and the 50% holding in NOTEFideltronik, at year-end, interestbearing receivables in the parent company were SEK 30 m. Collateral for receivables mainly consists of pledged shares and other assets.

Financial position and liquidity Cash flow

To compete successfully in the high mix/low volume segment, NOTE faces a significant challenge in continuously improving its working methods in sourcing, inventory control and logistics. This challenge is especially clear in rapid demand upturns and downturns, and relates primarily to the complexity of the supply of materials and varying leadtimes for electronic components.

Throughout the year, the global market for electronic components featured a shortage with extended leadtimes resulting for certain components. Accordingly, NOTE has made significant efforts alongside customers and suppliers to dimension inventory levels and maintain delivery precision at a favourable level.

The problematic situation on the component market combined with accentuating sales growth contributed to a significant inventory build-up through the summer.

Through focused initiatives, inventories were gradually downscaled in the second half-year. In the fourth quarter, inventories reduced by 18%—over 50% of this reduction was a result of the sale of joint venture NOTEFideltronik. Inventories at year-end were down 12% on the previous year-end.

Despite positive sales performance, accounts receivable increased by only 1% compared to the previous year-end. Accordingly, NOTE was able to reduce customer credit terms significantly compared to the previous year.

Accounts payable—trade, primarily consisting of purchases of electronic components and other production materials, were up 12% on the previous year-end.

Cash flow (after investments) amounted to SEK –13.6 (23.9) million in the year, or SEK –0.56 (1.52) per share. Mainly due to positive profit performance and the reduction of working capital achieved, cash flow in the fourth quarter was SEK 40.2 (14.2) million.

Equity to assets ratio

At the end of the period, the equity to assets ratio was 31.3% (27.9%). Mainly as a result of the new share issue executed in the second quarter, the equity/assets ratio increased by 8.9 percentage points on the end of the first quarter of this year.

Liquidity

The problematic situation on the component market combined with gradually accentuating sales growth put significant strains on the group's liquidity from time to time. NOTE is maintaining a sharp focus on actions to further enhance the group's liquidity and cash flow, with for example, loan covenants being renegotiated in the third quarter.

Available cash and cash equivalents, including unutilised overdraft facilities, were SEK 67.0 (50.7) million at year-end. Factored accounts receivable—trade were some SEK 188 (136) million at year-end.

Investments

Investments in property, plant and equipment in the year, excluding sales, were SEK 4.2 (12.0) million, or 0.3% (1.0%) of sales.

Depreciation and amortisation according to plan was SEK 31.9 (36.3) million. As part of the completed rationalisation programme, property plant and equipment and other intangible assets were impaired by SEK 17.0 million in the year.

Against the background of the positive progress of demand, in the fourth quarter, NOTE took the decision to invest in increased production capacity in its mechanics unit at Järfälla, near Stockholm.

Research and development activities

Through its operations, NOTE is closely involved in its customers' development

processes, including contributing to the industrialisation phase and guiding and developing production processes for its customers. 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

After the new share issue completed in the year, the total number of shares of the company is 28,872,600. All shares are of the same class and have a quotient value of SEK 0.50 per share.

There are no limitations on transferring shares in the form of pre-emption 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%, Investment AB Öresund with 11.1% of the votes.

The company's Board members are elected annually by the AGM, which also approves amendments to the Articles of Association. The Articles of Association were also amended in tandem with the new share issue in terms of the number of shares.

Otherwise, there are no known circumstances that could affect possibilities to acquire the company through a public offering for the shares of NOTE. For more information on the share, see The NOTE share on pages 26–27.

Human resources

The average number of full-time employees was 1,000 (977) in the year, 511 (470) of them being women and 489 (507) men. At year-end 2010, NOTE had 942 (1,100) employees.

Work attendance was 98.1 (97.6)% of regular working-hours in NOTE's Swedish operations and staff turnover was 4.0 (5.0)%. Total group work attendance was 95.3 (96.4)% of scheduled working-hours and staff turnover was 9.9 (3.6)%.

For more information on the employees, see Operations on pages 20–21.

Guidelines for remunerating senior managers

Senior management means the President and members of NOTE AB's management. For 2011, 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. Pensionable age is 65. NOTE offers benefits similar to the ITP scheme (supplementary pensions for salaried employees). The dismissal pay and severance pay of a manager 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 2010 was decided in accordance with the adopted guidelines formulated by the Board of Directors, which were then approved by the AGM 2010. For more information on remuneration, see note 7, Employees, personnel expenses and remuneration to senior management, on page 48.

Environment Reporting obligation and certification

The group conducts business in a Swedish subsidiary holding permits in accordance with 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. Seven 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 in accordance with 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 environmental matters, see Operations on pages 18–19.

Significant risks of operations

Operational risks

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

The market for outsourced electronics production is relatively young and usually considered fairly cyclical. Of the somewhat larger traditional players on this market, there are few, if any, that have succeeded in retaining good profitability through a business cycle. This fact played an important role in NOTE's choice of strategy for its future. NOTE's focus on Nearsourcing, targeting increased sales in combination with reduced overheads and investment costs in high-cost countries, is a way of reducing the risks of operations.

The group's accentuating sales growth, combined with shortages of certain electronic components, risks increasing the requirement for working capital. Accordingly, there is a sharp focus on managing liquidity risk.

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. In the year, extensive measures were taken to secure the group's funding, for example, executing a rights issue in the second quarter and re-negotiating loan covenants in the third quarter.

The group's currency risk is mainly due to purchasing of production material, where the majority of the group's invoicing is denominated in SEK. 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 on risks, see note 25, Financial risks and finance policy, on page 55.

Post-balance sheet events

The group has no significant events to report after the end of the financial year.

Expectations of future progress

NOTE puts a big emphasis on continuously improving quality and delivery precision for customers. After the completed restructuring programme, NOTE is going into 2011 with significantly improved cost structure. The goal is for NOTE to continue growing with profitability.

Even if in seasonal terms, the first quarter is fairly weak, demand remains positive. Problematic conditions on the global market for electronics components, combined with a number of operational challenges in the production phase mean that the short-term progress of volumes and inventories is hard to assess. NOTE is retaining a sharp focus on improving cash flow.

Proposed appropriation of profits

Total 4,919,307
Carried forward	4,919,307
Total	4,919,307
Profit/loss after tax	–100,726,200
Brought forward	105,645,507
propose that profit be appropriated as follows (SEK):
The Board of Directors and CEO

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	2010	2009
Net revenue	2, 3	1,210,716	1,200,063
Cost of goods sold and services		–1,150,205	–1,173,,630
Gross profit/loss		60,511	26,433
Selling expenses		–53,544	–48,196
Administrative expenses		–49,810	–64,787
Other operating revenue	5	18,315	38,133
Other operating expenses	6	–23,637	–42,380
Operating profit/loss	3, 7, 8, 9, 27	–48,165	–90,797
Financial income		2,172	1,813
Financial expenses		–13,438	–8,941
Net financial income/expense	10	–11,266	–7,128
Profit/loss before tax		–59,431	–97,925
Tax	11	–2,527	16,906
Profit/loss after tax*		–61,958	–81,019
Basic and diluted earnings per share, SEK	19	–2.55	–5.14

*No minority interests for the financial year or comparative year

Consolidated Statement of Comprehensive Income

SEK 000	2010	2009
Profit/loss after tax	–61,958	–81,019
Other comprehensive income:
Exchange rate differences	–10,184	–3,673
Cash flow hedges	–159	–313
Total other comprehensive income	–10,343	–3,986
Total comprehensive income for the year	–72,301	–85,005

Consolidated Balance Sheet

SEK 000	NOTE	31 Dec 2010	31 Dec 2009
Assets	3, 4, 14
Intangible assets	12	70,714	81,465
Property, plant and equipment	3, 13	72,757	122,045
Long-term receivables	15	8,444	2,621
Deferred tax assets	11	28,982	28,410
Total non-current assets		180,897	234,541
Inventories	16	192,579	217,887
Accounts receivable—trade	25, 26	234,350	231,871
Tax receivables		5,859	8,229
Other receivables	15, 26	35,124	22,777
Prepaid expenses and accrued income	17	11,041	13,331
Cash and cash equivalents	26, 30	33,682	24,416
Total current assets		512,635	518,511
Total ass ets		693,532	753,052
Equity	18
Share capital (28,872,600/9,624,200 class A shares)		14,436	4,812
Other paid-up capital		217,862	148,100
Reserves		–4,557	5,786
Retained profit/loss		–10,728	51,230
Equity		217,013	209,928
Liabilities	4, 14
Long-term interest-bearing liabilities	20, 25, 26	4,666	13,977
Pension commitments	21, 22	–	12,748
Other provisions	22	–	153
Deferred tax liabilities	11	2,410	3,590
Total non-current liabilities		7,076	30,468
Current interest-bearing liabilities	20, 25, 26	202,240	237,562
Accounts payable—trade	25, 26	171,945	153,917
Tax liabilities		810	498
Other liabilities	23, 26	33,575	35,614
Accrued expenses and deferred income	24	43,958	46,767
Other provisions	22	16,915	38,298
Total current liabilities		469,443	512,656
Total equity and liabilities		693,532	753,052

For information on the group's pledged assets and contingent liabilities see note 28 on page 56.

Consolidated Statement of Changes in Equity

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit/loss	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	–81,019	–85,006
Closing equity, 31 Dec. 2009	4,812	148,100	5,786	51,230	209,928

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit/loss	Total equity
Opening equity, 1 Jan. 2010	4,812	148,100	5,786	51,230	209,928
Comprehensive income
Profit/loss after tax	–	–	–	–61,958	–61,958
Other comprehensive income
Exchange rate differences	–	–	–10,184	–	–10,184
Cash flow hedges	–	–	–159	–	–159
Total comprehensive income	–	–	–10,343	–61,958	–72,301
Transactions with equity holders
New share issue	9,624	76,994	–	–	86,618
Costs relating to new share issue	–	–7,232	–	–	–7,232
Closing equity, 31 Dec. 2010	14,436	217,862	–4,557	–10,728	217,013

Consolidated Cash Flow Statement

SEK 000	NOTE	2010	2009
	30
Operating activities
Profit/loss before tax		–59,431	–97,925
Reversed depreciation and amortisation		31,916	36,312
Other non-cash items		–6,622	36,672
Tax paid		–1,946	–4,993
		–36,083	–29,934
Change in working capital
Increase (–)/decrease (+) in inventories		2,702	108,360
Increase (–)/decrease (+) in trade receivables		–11,203	73,462
Increase (+)/decrease (–) in trade liabilities		18,964	–109,320
		10,463	72,502
Cash flow from operating activities		–25,620	42,568
Investing activities
Purchase property, plant and equipment		–4,191	–11,957
Sale of property, plant and equipment		5,891	2,663
Purchase of intangible assets		–191	–4,525
Sale of subsidiaries/operations, net liquidity effect		5,921	–
Purchase of subsidiaries/operations, net liquidity effect		–	–4,835
Sale of financial assets		4,596	–
Cash flow from investing activities		12,026	–18,654
Financing activities
New share issue		79,386	–
Borrowings		39,173	50,000
Amortisation of loans		–93,148	–84,599
Cash flow from financing activities		25,411	–34,599
Cash flow for the year		11,817	–10,685
Cash and cash equivalents
At beginning of period		24,416	35,941
Cash flow before financing activities		–13,594	23,914
Cash flow from financing activities		25,411	–34,599
Exchange rate difference in cash and cash equivalents		–2,551	–840
Cash and cash equivalents at end of period		33,682	24,416

Notes on the consolidated financial statements

Note 1 Critical accounting policies

Consistency with standards and law

The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS ) issued by the International Accounting Standards Board (IASB), as endorsed by the EU and interpretation statements from the International Financial Reporting Interpretations Committee (IFRIC). RFR's (Rådet för finansiell rapportering, the Swedish Financial Reporting Board) recommendation RFR 2.1, 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 policies for the group have been applied consistently for all periods presented in the consolidated accounts, unless stated otherwise below. The group's accounting policies 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 1 April 2011. The Consolidated Income Statement and Balance Sheet will be subject to adoption at the AGM (Annual General Meeting) on 28 April 2011.

Group

Amended accounting policies

The following new standards and interpretation statements were adopted when preparing the financial statements for 2010:

IFRS 3 (revised), "Business Combinations" (applies from 1 July 2009). This revised standard continues to prescribe acquisition accounting being applied for business combinations but with some material amendments. For example, all payments to purchase an operation are recognised at fair value on the acquisition date, while subsequent conditional payments are classified as liabilities that are then restated via the Income Statement. There is freedom of choice for each acquisition regarding non-controlling interests in the acquired operation, which may either be measured at fair value or the proportional share of the acquired operation's net assets held by the non-controlling interest. All transactions relating to the business combination should be expensed. The group is applying IFRS3 (revised) from 1 January 2010, but it did not have any effect in 2010 because no business combinations were conducted.

IAS 27 (revised), requires that the effects of all transactions with non-controlling interests are recognised in equity, providing the controlling interest is retained and these transactions no longer give rise to goodwill or gains and losses. The standard also states that when a parent company relinquishes controlling influence, the potential remaining participation should be restated at fair value and a gain or loss recognised in the Income Statement. IAS 27 (revised) did not have any effect on the current period, because the group does not have minority interests.

IFRIC 17, "Distributions of Non-cash Assets to Owners" (applies to financial years starting 1 July 2009 or later). This interpretation statement was published in November 2008. This interpretation offers guidance on the recognition of agreements according by which a company distributes non-cash assets to owners. An amendment has also been made to IFRS 5, requiring assets to be classified as held for transfer, only if they are available for immediate transfer in their current condition and the transfer is very likely. The group is applying IFRIC 17 from 1 January 2010, but it did not have any effect on the current period because there was no dividend.

IFRIC 18, "Transfer of Assets from Customers", applies for transfers of assets that occurred on 1 July 2009 or later. This interpretation statement clarifies IFRS's stipulations on recognition of agreements by which a company receives property, plant or equipment from a customer, which the company must then used either to connect the customer to a network or to provide the customer with ongoing access to goods or services (such as electricity, gas or water) or to do both. In certain cases, the company receives cash and cash equivalents from a customer and this amount should only be used to prepare or acquire property, plant or equipment to connect the customer to a network or to provide the customer with ongoing access to goods or services, or to do both. The group is applying IFRIC 18 from 1 January 2010, but it did not have any effect on the consolidated financial statements.

IFRIC 9 and IAS 39 (amendment), embedded derivatives (applies for financial years that end on 30 June 2009 or later). This amendment requires that companies should judge whether embedded derivatives can be separated from their host contract when the company reclassifies a composite financial asset from the category of fair value via the Income Statement. Judgements are made on the basis of the circumstances prevailing on the latter of the date when the company first became party to an agreement and the date when the terms of the agreement are amended that materially affect the cash flows that would otherwise have been required according to the agreement. If the company is unable to make this judgement, the composite instrument should remain as classified as measured at fair value via the Income Statement. The group is applying IFRS 9 and IAS 39 (amendment) from 1 January 2010, but it did not have any effect on the consolidated financial statements.

IFRIC 16 (amendment), "Hedges of a Net Investment in a Foreign Operation" (applies for financial years that start 1 July 2009 or later). This amendment states that in the hedging of a net investment in a foreign operation, instruments that satisfy the conditions for hedge accounting can be held by any of the companies in the group, including the foreign operation, providing that the requirements of identification, documentation and effectiveness of IAS 39 regarding hedging of a net investment are satisfied. In particular, the group's hedging strategy should be clearly documented according to the possibilities of identification at different tiers in the group. The group is applying IFRIC 16 from 1 January 2010, but this did not have any effect on the consolidated financial statements.

IAS 1 (Amendment), "Presentation of Financial Statements." This 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. By an alteration of the definition of a current liability, the amendment enables a liability to be classified as non-current (providing that

the company has an unconditional right to delay settlement by transferring cash 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 is applying IAS 1 (amendment) from 1 January 2010, but this did not have any effect on the consolidated financial statements.

IAS 36 (Amendment), "Impairment" applies to financial years starting 1 January 2010 or later. This amendment clarifies that the largest cash-generating unit (or group of units) over which goodwill should be allocated with the intention of impairment testing, is an operating segment according to the definition in point 5 of IFRS 8, "Operating Segments" (i.e. before the merger of segments with similar economic characteristics). The group is applying IAS 36 (amendment) from 1 January 2010, but it did not only have any effect on the consolidated financial statements.

IFRS 2 (amendment), "Group Cash-settled and Share-based Payment Transactions," applies to financial years starting 1 January 2010 or later. 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 in IFRIC 11 is also complemented regarding the classification of intragroup transactions, which are not dealt with in the interpretation statement. The group is applying IFRS 2 (amendment) from 1 January 2010, but it did not have any effect on the consolidated financial statements.

IFRS 5 (amendment), "Non-current Assets Held for Sale and Discontinued Operations." This 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. The group is applying IFRS 5 (amendment) from 1 January 2010, but it did not have any effect on the consolidated financial statements.

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 2011 onwards and have not been adopted when preparing these financial statements.

IFRS 9, "Financial Instruments" (published in November 2009). This standard is the first stage of a process to replace IAS 39, "Financial Instruments: Recognition and Measurement."

IFRS9 introduces two new requirements for the recognition and measurement of financial assets. This standard is not applicable before financial years starting 1 January 2013 but is available for prospective application. However, this standard has not yet been endorsed by the EU. The group has yet to evaluate the full effect of IFRS 9 on the financial statements. However, the initial indications are that it will have a significant effect on the consolidated financial statements.

IAS 24 (revised), "Related Party Disclosures," issued in November 2009. This replaces IAS 24, "Related Party Disclosures," issued in 2003. IAS 24 (revised) should be applied to financial years starting 1 January 2011 or later. Advance application is permitted for all or parts of the standard. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for a government corporation to disclose details of all transactions with central government and other companies affiliated to central government. The group will be applying the revised standard from 1 January 2011. This amendment is not expected to have any significant effect on the consolidated financial statements.

"Classification of subscription rights" (Amendment of IAS 32), published in October 2009 (applies to financial years starting 1 February 2010 or later). Prospective application is permitted. This amendment deals with the reporting of subscription rights in currencies other than the company's functional currency. Providing that certain requirements are satisfied, such subscription rights should now be classified as equity regardless of the currency the price is expressed in. Previously, such subscription rights were classified as derivative liabilities. The amendment should be applied retroactively in accordance with IAS 8 (Accounting Policies, Changes in Estimates and Errors." The group will be applying this amendment from 1 January 2011. The amendment is not expected to have any significant effect on the consolidated financial statements.

IFRIC 19, "Extinguishing Financial Liabilities with Equity Instruments" (applies to financial years starting 1 July 2010 or later). This amendment clarifies reporting the re-negotiation of loan terms so that all or parts of the loan are repaid through debt for equity swaps. Shares should be measured at fair value and the difference between this value and the book value of the loan should be recognised in the Income Statement. Where the fair value of the shares cannot be measured reliably, it should instead be measured so that it reflects the fair value of the loan. The group will be applying this interpretation statement from 1 January 2011 but it is not expected to affect the consolidated financial statements.

IFRIC 14 (amendment) "Advance Payment of a Minimum Funding Requirement." This amendment adjusts an unintended consequence of IFRIC 14, "IAS 19—Limitation of a Defined Benefit Asset, Minimum Funding Requirements and Their Interaction." Without the amendment, companies covered by a minimum funding requirement are not permitted to report certain advance payments regarding future expenses as an asset. This was not the intention when IFRIC 14 was issued, and is corrected by this amendment. This amendment applies to financial years starting 1 January 2011. Prospective application is permitted. The amendment should be applied retroactively for the earliest comparative period reported. The group will apply the amendment for financial years starting on January 2011.

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 CEO, 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 rewards. 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 17 wholly owned companies. Subsidiaries are reported in accordance with 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. In business combinations where the acquisition cost exceeds the fair value of acquired assets and liabilities and contingent liabilities taken over that are recognised separately, the difference is recognised as goodwill. When the difference is negative, this is recognised directly in the Income Statement. Subsidiary financial statements are consolidated from the acquisition date until the date the controlling influence ceases. For acquisitions until 2009 inclusive, transaction expenses directly attributable to the acquisition were also included in cost.

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 recognised 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 recognised 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 recognised 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 on 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 and balance sheet items 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 recognised in the Income

Statement. The exceptions are when the transactions are hedges that satisfy the requirements of hedge accounting, when the loss/gain is recognised in other comprehensive income. Exchange rate gains and losses relating to loans and cash and cash equivalents are recognised as financial revenue or expenses in the Income Statement. All other exchange rate gains and losses are recognised as other operating revenue or expenses 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 recognised in other comprehensive income.

Revenues

Sales of goods and executing services assignments

Revenues from the sale of goods and manufacturing services are recognised to the Income Statement when the significant risks and rewards associated with ownership of the product have been transferred to the buyer and when it is probable that the future economic rewards will flow to the company and these rewards 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 rewards the company receives, or may receive, on its own behalf. Revenues are recognised at the actual value of what is received, or will be received, less deductions for discounting. Revenues for consulting services are recognised according to the percentage of completion method provided that the labour hours incurred are clearly identifiable and can be measured reliably.

Central government support

Central government support is recognised in accordance with IAS 20. Central government subsidies are recognised 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 recognised in the Income Statement in the period when the receivable from central government arises. Central government subsidies for investments are recognised 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 rewards 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 recognised in the Income Statement on a straight-line basis over the lease term. Rewards received on signing a contract are recognised as a portion of the total lease expense in the Income Statement.

Finance leases

Assets held through finance lease arrangements are recognised as assets in the Consolidated Balance Sheet in accordance with the principles for owned assets. The obligation to pay future lease payments is recognised 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 recognised 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 recognised 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 recognised 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 recognised in accordance with the stipulations of IAS 39. On the assets side, financial instruments recognised in the Balance Sheet include cash and cash equivalents, accounts receivable—trade and loans receivable. Accounts payable—trade and borrowings are recognised under liabilities and equity.

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

NOTE conducts impairment tests for its financial assets at the end of each reporting period. A financial asset is only impaired if there is objective evidence that it is impaired due to "loss events" that affect future cash flows of the assets and can be measured reliably. The asset's impairment loss is recognised in the Income Statement.

Initially, financial instruments are recognised at cost corresponding to the fair value of the instrument, their transaction costs are included directly in profit or loss. Subsequent recognition 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 recognised at fair value, and then at amortised cost by applying the effective interest method, less potential deductions for impairment. "Loans receivable and accounts receivable—trade" are included in current assets apart from items with maturities of more than 12 months from the end of the reporting period, which are classified as non-current assets.

- Financial instruments measured at fair value via the Income Statement

Financial instruments in this category are recognised continuously at fair value with value changes recognised 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 recognised at fair value, implying that transaction costs are charged to profit for the period. After initial reporting, derivative instruments are recognised at fair value, with value changes recognised in the Income Statement.

- Other financial liabilities

Loans and other financial liabilities such as accounts payable—trade, are included in this category. Initially, these liabilities are recognised at fair value, and then at amortised cost by applying the effective interest method, less potential provisioning for value impairment.

Factoring

NOTE uses factoring as part of its external funding. A factored trade payable is recognised as a whole as a pledged asset in consolidated contingent liabilities. The factoring liability is recognised as a current interest-bearing liability in tandem with payment. Upon full payment from the customer, the amount of the accounts receivable—trade and the factoring liability are written down to zero, and NOTE's contingent liability ceases.

Cash Flow Hedging

Currency exposure regarding future forecast flows is partly hedged through currency forwards. Currency forwards that hedge future flows are recognised in the Balance Sheet at fair value. Changes to fair value while recognised in other comprehensive income and are reclassified from equity to profit or loss in those periods when the hedged item affects profit or loss. When a forecast transaction is no longer expected to occur, the accumulated gain or loss recognised in other comprehensive income is immediately reclassified from equity to 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 recognised 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 in accordance with the purpose of its acquisition. The accounting policies 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 de-recognised from the Bal-

ance Sheet on disposal or divestment, or when no future economic rewards 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 recognised as other

Additional expenditure

operating revenue/expenses.

Additional expenditure is added to cost only if it is likely that the future economic rewards associated with the asset will arise for the company, and the cost can be measured reliably. All other additional expenditure is recognised 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 recognised 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 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 recognised 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.

Other intangible assets

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

Additional expenditure

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

Amortisation

Amortisation is recognised in the Income Statement on a straight-line basis over the estimated useful lives of intangible assets, providing such useful lives are not indeterminable. 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 recognised 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

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 in accordance with the relevant standards. An impairment loss is recognised 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.

Measuring 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 recognised as a liability after the AGM has approved the dividends.

Employee benefits

Defined-contribution pension plans

Commitments regarding expenditure on defined-contribution plans are recognised as an expense in the Income Statement when they occur.

Defined-benefit pension plans

The group had one traditional assurance defined-benefit plan until 2009 inclusive, which was discontinued during 2010, and there were no defined benefit pension plans as of the reporting date. 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 recognised 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 recognised 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 recognised 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 recognised 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. Provisions are measured at the present value of the amounts expected to be required to settle the commitment.

Restructuring and other non-recurring expenses

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

Non-recurring expenses mean expenses of significant amounts, and simultaneously, of such a nature that they can be considered as non-operating and not recurrent each year. For example, non-recurring expenses are impairment of assets in disputes and expenses relating to changing CEOs.

Tax

Income tax comprises current tax and deferred tax. Income tax is recognised in the Income Statement apart from when the underlying transaction is recognised directly in other comprehensive income or directly against equity, whereupon the associated tax effect is recognised in other comprehensive income or directly 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 recognition 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 recognised 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 measurement 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 measuring 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 recognised 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 recognised as a liability or provision because it is not likely that an outflow of resources will be necessary or the size of the commitment can be reliably measured.

Note 2 Allocation 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, in accordance with 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.

	2010	2009
NEAR SOURCIN G CENTRE S
External sales	1,137,569	1,173,244
Internal sales	58,766	93,017
Production, sales and administrative expenses	–334,100	–385,893
Depreciation and amortisation	–12,657	–19,305
Other non-cash items (excl. depreciation and amortisation)	4,114	13,158
Operating profit/loss	48,246	–46,713
Property, plant and equipment	29,193	57,109
Investments in property, plant and equipment	1,496	4,167
Inventories	123,431	114,720
Average number of employees	417	501
INDU STRIAL PLANT S
External sales	72,311	26,468
Internal sales	448,648	366,548
Production, sales and administrative expenses	–156,040	–112,192
Depreciation and amortisation	–17,502	–15,046
Other non-cash items (excl. depreciation and amortisation)	14,178	3,272
Operating profit/loss	–70,909	–18,938
Property, plant and equipment	43,513	62,964
Investments in property, plant and equipment	2,695	8,430
Inventories	69,148	103,116
Average number of employees	573	460
OTHER UNIT S AND ELIMINATION S
External sales	836	351
Internal sales	–507,414	–459,565
Production, sales and administrative expenses	955	–19,006
Depreciation and amortisation	–1,757	–1,961
Other non-cash items (excl. depreciation and amortisation)	–24,914	20,243
Operating profit/loss	–25,502	–25,146
Property, plant and equipment	51	1,972
Investments in property, plant and equipment	–	–
Inventories	–	51
Average number of employees	10	16

Operating profit/loss reconciled against profit/loss before tax	2010	2009
Operating profit/loss for segments for which information should be disclosed	–22,663	–65,652
Operating profit/loss for other segments and eliminations	–25,502	–25,146
Financial income and expenses—net	–11,266	–7,128
Profit/loss before tax	–59,431	–97,926

NOTE's registered office is in Sweden. Net revenues from external customers in Sweden were SEK 672.3 (727.5) m, and from other countries SEK 538.4 (472.6) m. Non-current assets in Sweden (excluding eliminations) were SEK 378.2 (421.2) m as of the reporting date, and in other countries SEK 80.7 (128.0) m. Deferred tax assets in Sweden were SEK 11.7 (6.7) m and other countries SEK 17.3 (21.7) m as of the reporting date.

Note 4 Business combinations

2009

NOTE AB acquired the remaining 50% of the shares of IONOTE EMS Ltd. based in China, as of 31 December 2009. This company was previously operated as a joint venture with partner Ionics EMS.

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

	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
Goodwill on consolidation			3,607
Purchase price			6,478
Cash (acquired)			1,643
Net cash outflow			4,835

Goodwill on consolidation 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.

Note 5 Other operating revenue

	2010	2009
Exchange gains on trade receivables/liabilities	15,716	35,824
Other	2,599	2,309
	18,315	38,133

Note 6 Other operating expenses

	2010	2009
Exchange losses on trade receivables/liabilities	–22,739	–41,305
Other	–898	–1,075
	–23,637	–42,380

Note 7 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits
	2010	2009
Salaries and benefits	–219,807	–232,283
Pension expenses, defined-benefit plans (more information in note 21)	–328	–836
Pension expenses, defined-contribution plans	–16,256	–18,028
Social security contributions	–48,576	–64,204
	–284,967	–315,351

Average number of employees

	2010	Of which men	2009	Of which men
Sweden	317	65%	406	66%
Norway	43	47%	50	67%
UK	30	57%	30	60%
Finland	37	65%	30	80%
Estonia	229	27%	229	28%
China	164	43%	12	43%
Poland	108	61%	118	56%
Lithuania	72	30%	102	30%
Group total	1,000	49%	977	52%

Restructuring costs

Salaries and benefits include restructuring costs of SEK 2.8 (–) m for NOTE's current restructuring program and provisioning for the resigning CEO of SEK – (8.8) m. Restructuring costs also include consulting fees of SEK 5.2 m for the previous CEO.

Division between sexes in group management

	2010 Share of women	2009 Share of women
Board members, Presidents	4%	4%
Other senior management, 5 (5) people *	0%	0%

* Total number of senior managers in the year, the period Q1–2 a total of four people, Q3 three people and Q4 a total of two people.

Senior management's remuneration

Remuneration and other benefits, 2010		Basic salary, Directors' fees	Performance related pay	Other benefits	Pension expense	Total
Chairman of the Board:	Stefan Charette, elected 27 April 10	145	–	–	–	145
Board members:	Kjell Åke Andersson, elected 27 April 10	283	–	–	–	283
	Bo Andersson, resigned 27 April 10	33	–	–	–	33
	Håkan Gellerstedt, resigned 27 April 10	33	–	–	–	33
	Göran Gezelius, resigned 27 April 10	33	–	–	–	33
	Bruce Grant, Chairman until 27 April 10 incl.	146	–	–	–	146
	Göran Jansson, CEO until 16 July 10 incl.	2,049	–	–	–	2,049
	Henry Klotz, elected 27 April 10	79	–	–	–	79
	Per-Arne Sandström, resigned 27 April 10	33	–	–	–	33
	Göran Sigfridsson, resigned 27 April 10	33	–	–	–	33
CEO:	Peter Laveson, elected to the board 27 April 10, appointed as CEO, 16 July 10	771	–	–	186	957
	Knut Pogost, left 25 January 10	5,541	–	–	–	5,541
Other senior management (5 people)		3,871	–	228	1,002	5,101
		13,050	–	228	1,188	14,466

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit/loss for 2010. Un-paid remuneration to the departing CEO was SEK (4.3) 4.7 m at year-end, of which SEK 0.4 (1.3) m was benefits and pensions. Consulting fees for the CEO not employed by the group are in the CEO line. The Board of Directors line includes invoiced fees from sole proprietorships of SEK 0.2 (–) m. The Report of the Directors states details of guidelines for remunerating senior management.

* Total number of senior managers in the year, the period Q1–2 a total of four people, Q3 three people and Q4 a total of two people.

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 April 09	33	–	–	–	33
	Bo Andersson, elected 21 April 09	67	–	–	–	67
	Håkan Gellerstedt	100	–	–	–	100
	Göran Gezelius, elected 21 April 09	67	–	–	–	67
	Göran Jansson, elected 21 April 09	190	–	–	–	190
	Hans Johansson, resigned 21 April 09	33	–	–	–	33
	Per-Arne Sandström	100	–	–	–	100
	Göran Sigfridsson, elected 21 April 09	67	–	–	–	67
CEO:	Arne Forslund, left 3 June 09	5,438	–	432	2,030	7,900
	Knut Pogost, appointed 3 June 09	1,992	–	–	–	1,992
Other senior management (5 people)		5,329	–	226	1,172	6,727
		13 636	–	658	3 202	17 496

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profits for 2008. Un-paid remuneration to the resigning CEO was SEK 4.7 m at the end of the year, 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.

Note 8 Auditors' fees and reimbursement

	2010	2009
PwC
Auditing assignment	–1,100	–1,240
Auditing in addition to audit assignment	–70	–17
Tax consultancy	–4	–30
Other services	–665	–35
Other Auditors
Auditing assignment	–375	–535
Auditing in addition to audit assignment	–	–
Tax consultancy	–20	–
Other services	–644	–721

Auditing of the consolidated accounts was conducted through the whole year. No separate fees were payable for reviewing interim reports.

Note 9 Operating expenses by type

	2010	2009
Cost of goods and material	–724,425	–717,499
Personnel expenses	–284,967	–315,351
Depreciation and amortisation	–31,916	–36,312
Other	–235,888	–259,831
	–1,277,196	–1,328,993

Note 11 Tax

Reported in Income Statement	2010	2009
Current tax expense (–)/tax revenue (+)
Tax expense for the period	–4,520	–2,514
Adjustment of tax attributable to previous year	–48	–594
Deferred tax expense (–)/tax revenue (+)
Deferred tax relating to temporary differences/appropriations	–1,991	14,675
Deferred tax revenue/expense in capitalised/utilised tax value in loss carry-forward	7,095	6,473
Adjustment of tax attributable to the previous year	–3,063	–1,134
Total reported tax in group	–2,527	16,906

Reconciliation of effective tax	%	2010	%	2009
Profit/loss before tax		–59,431		–97,926
Tax at applicable rate for parent company	26.3	15,630	26.3	25,755
Effect of other tax rates for foreign subsidiaries	–8.9	–5,298	–0.2	–254
Non-deductible expenses	–1.6	–942	–1.1	–1,080
Non-taxable revenue	2.1	1,266	2.5	2,477
Tax attributable to previous year	–5.2	–3,112	–1.8	–1,728
Un-reported tax revenue on loss for the year		–17.4 –10,319	–8.1	–7,914
Standard interest on tax allocation reserve	0.0	–	–0.3	–301
Other	0.4	248	–0.0	–49
		–4.3 –2,527	17.3	16,906

		Deferred tax asset		Deferred tax liability		Net
Reported in Balance Sheet	31 Dec 2010	31 Dec 2009	31 Dec 2010	31 Dec 2009	31 Dec 2010	31 Dec 2009
Property, plant and equipment	1,630	–	2,410	3,270	–780	–3,270
Pension provisions	–	393	–	320	–	73
Derivatives measured at fair value	146	–	–	–	146	–
Loss carry-forwards	21,247	17,667	–	–	21,247	17,667
Provisions	5,959	10,350	–	–	5,959	10,350
Tax receivables/liabilities	28,982	28,410	2,410	3,590	26,572	24,820

Deferred tax assets on loss carry-forwards

Deferred tax assets are recognised in deductible loss carry-forwards to the extent it is likely that they can be utilised against future taxable profits. For several years historically, NOTE has achieved profitability. Recognised losses in the years 2008–2010 are closely linked to the global financial crisis and the costs for restructuring measures NOTE has executed. As a result of the restructuring actions, costs reduced. Operating profit/loss for the fourth quarter 2010 was positive at SEK 12.2 m. None of the loss carry-forwards are subject to time limitation.

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 –54.4 (–30.7) m.

Other provisions for tax		31 Dec 2010 31 Dec 2009
Carrying amount at beginning of period	3,590	19,581
Amount provisioned in period	–	322
Amounts utilised in period	–1,180	–16,313
	2,410	3,590

Note 10 Net financial income/expense

	2010	2009
Interest income on bank balances	621	1,821
Exchange rate gains	1,394	–
Other	157	–8
Financial income	2,172	1,813
Interest costs on financial liabilities measured at amortised cost	–7,586	–6,690
Bank charges	–4,410	–1,221
Exchange rate losses	–1,416	–
Other	–26	–1,030
Financial expenses	–13,438	–8,941
Net financial income/expense	–11,266	–7,128

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

	Balance as of 1 Jan 2009	Reported in Income Statement	Reported against comprehensive income	Purchase/sale 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	–	–	–
Derivatives measured at fair value	–269	269	–	–	–
Loss carry-forward	9,868	5,339	2,460	–	17,667
Provisions	13,651	–1,491	–1,810	–	10,350
	4,411	20,014	661	–266	24,820
	Balance as of 1 Jan 2010	Reported in Income Statement	Reported against comprehensive income	Purchase/sale of operation	Balance as of 31 Dec 2010
Property, plant and equipment	–3,270	2,471	19	–	–780
Pension provisions	73	–73	–	–	–
Derivatives measured at fair value	–	89	57	–	146
Loss carry-forward	17,667	3,896	–316	–	21,247
Provisions	10,350	–4,342	–49	–	5,959
	24,820	2,041	–289	–	26,572

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 policies. Intangible assets with determinable useful lives are amortised on a straight-line basis over their useful lives.

	Goodwill, purchased	Capitalised expenditure for software, purchased	Trademarks and brands etc., purchased	Total
Cumulative cost
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
Sales and retirements	–	–3	–	–3
Closing balance, 31 Dec 2009	73,139	16,173	1,380	90,692
Opening balance, 1 Jan 2010	73,139	16,173	1,380	90,692
Business combinations	–	–	–	–
Reclassification and exchange rate effects	–458	–808	–28	–1,294
Other investments	–	153	38	191
Sales and retirements	–	–6,761	–	–6,761
Closing balance, 31 Dec 2010	72,681	8,757	1,390	82,828
Accumulated amortisation and impairment
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
Sales and retirements	–	3	–	3
Closing balance, 31 Dec 2009	–1,924	–6,123	–1,180	–9,227
Opening balance, 1 Jan 2010	–1,924	–6,123	–1,180	–9,227
Reclassification and exchange rate effects	–	470	3	473
Impairment for the year	–255	–5,005	–	–5,260
Amortisation for the year	–	–3,600	–76	–3,676
Sales and retirements	–	5,576	–	5,576
Closing balance, 31 Dec 2010	–2,179	–8,682	–1,253	–12,114
Carrying amounts
As of 1 Jan 2009	67,115	8,950	292	76,357
As of 31 Dec 2009	71,215	10,050	200	81,465
As of 1 Jan 2010	71,215	10,050	200	81,465
As of 31 Dec 2010	70,502	75	137	70,714

Amortisation and impairment

Amortisation is included in the following Income Statement lines	2010	2009
Cost of goods sold and services	–3,235	–3,326
Administrative expenses	–5,701	–8
Selling expenses	–	–
	–8,936	–3,334

Impairment losses

Impairment losses for the year relate primarily to the restructuring plan decided in the first quarter of 2010.

Impairment testing of goodwill

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

		31 Dec 2010 31 Dec 2009
NOTE Pärnu/NOTE Hyvinkää	19,904	19,904
IONOTE	12,175	12,175
NOTE Norrtelje	10,719	–
NOTE Nyköping-Skänninge	–	11,319
NOTE Lund	9,340	8,740
NOTE Torsby	6,833	6,833
NOTE Norge	5,436	5,677
NOTE Components Järfälla	3,651	3,651
NOTE UK	2,444	2,661
	70,502	70,960
Units without significant goodwill values, total	–	255
	70,502	71,215

Impairment tests are based on measurement of value in use, a value based on cash flow forecasts totalling 3 (10) years. Cash flow for the first year is based on budget set by the Board of Directors. The following two years are based on the company's best judgement. Cash flow beyond the forecast period is extrapolated from 2014 using the assessed growth rate as follows.

The present value of forecast cash flows has been calculated with a discount rate based on risk-free interest and the risk judged to be associated with operations. NOTE mainly has a joint funding facility. Accordingly, the same discount rate after tax of 11.3 (11.6) %, has been used for all units.

Note 13 Property, plant and equipment

Method for defining values
Growth in the forecast period Market growth has been estimated at 5 (5)% during the forecast period for most of the units. However, for the opera tion in China, higher growth has been estimated because this operation is in build-up. Market growth is based on historical experience, estimates in sector research and other externally available information.
Growth after the forecast period is estimated at 1.5%.
The cost of electronic components is expected to reduce during the forecast period, partly because of continued rationalisation of the production process and partly through increased purchasing volumes and improved co-ordination or purchasing processes.
Payroll expenses have been estimated using collective agree ments and considering historical pay increases. In addition, a growing share of production being conducted in the group's plants in low-cost countries has also been considered.

The recoverable values of all unit exceeds carrying amount.

Sensitivity analysis, goodwill impairment testing

With the above calculation assumptions and considering the growth and profitability potential estimated by NOTE in its business model and restructuring actions taken, there is no impairment of goodwill values at the reporting date.

If there is no market growth during or after the forecast period, this would not cause any impairment. An increase of the discount rate after tax by one percentage point, from 11.3 to 12.3 percentage points, would not imply any impairment.

Value in use reduces but still exceeds the carrying amount of all units.

	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 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
Sales	–	–	–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
Opening balance, 1 Jan 2010	69,642	8,030	183,311	55,676	316,659
Business combinations	–	–	–	–	–
Other investments	–	186	3,505	500	4,191
Sales	–11,454	–737	–53,620	–9,471	–75,282
Reclassification and exchange rate effects	–4,296	–454	–5,680	211	–10,219
Closing balance, 31 Dec 2010	53,892	7,025	127,516	46,916	235,349
Depreciation and impairment
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
Sales	–	–	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
Opening balance, 1 Jan 2010	–24,190	–2,647	–121,748	–46,029	–194,614
Depreciation for the year	–3,385	–1,370	–20,571	–2,914	–28,240
Impairment loss for the year	–4,555	–	–900	–	–5,455
Sales	5,754	576	46,421	8,080	60,831
Reclassification and exchange rate effects	1,585	210	3,432	–341	4,886
Closing balance, 31 Dec 2010	–24,791	–3,231	–93,367	–41,204	–162,593
Carrying amounts
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
As of 1 Jan 2010	45,452	5,383	61,563	9,647	122,045
As of 31 Dec 2010	29,101	3,794	34,150	5,712	72,757

Taxable values

		31 Dec 2010 31 Dec 2009
Taxable values, buildings in Sweden	11 674	14 556
Taxable values, land in Sweden	5 000	5 231

Information on central government support in the group

The aggregate cost of the assets the support is intended to cover amounts to 4,227 in the period. The cost reduced by 634 for enacted government support. Total utilised, but not received, investment subsidies amount to 630 (317) on the reporting date. Pledged assets for subsidies received in 2010 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	2010	2009
Cost of goods sold and services	–32,269	–29,749
Administrative expenses	–1,059	–2,931
Selling expenses	–367	–298
	–33,695	–32,978

Finance leases (leased production equipment)

The group leases production equipment through several different finance lease arrangements. As of 31 December 2010, the value of leased assets was 12,993 (27,441).

Collateral

As of 31 December 2010, property with a carrying amount of 29,101 (45,452) was pledged as collateral for bank borrowings.

Note 14 Participations in joint ventures

The group's holding in the joint venture NOTEFideltronik SA was sold in December 2010, implying that NOTEFideltronik is only reported in revenues and expenses below. For 2009, NOTEFideltronik is included the Income Statement and Balance Sheet, and the former joint venture IONOTE in the Income Statement. The following items, which constitute the group's participating interest in the joint venture's assets, liabilities, revenues and expenses, are included in the consolidated financial statements.

2010	2009
34,488	56,439
–41,637	–63,882
–7,149	–7,443
–	7,220
–	21,092
–	28,312
–	–
–	14,029
–	14,029
–	14,283

Note 15 Long-term receivables and other receivables

		31 Dec 2010 31 Dec 2009
Long-term receivables
Interest-bearing loans	6,000	–
Other long-term receivables	2,444	2,621
	8,444	2,621
Other receivables that are current assets
Interest-bearing loans	24,488	–
VAT	3,917	16,623
Other	6,719	6,154
	35,124	22,777

Note 16 Inventories

		31 Dec 2010 31 Dec 2009
Raw materials and consumables	159,740	201,351
Products in process	35,108	42,170
Finished goods and goods for re-sale	10,078	9,975
Obsolescence provision	–12,347	–35,609
	192,579	217,887

The expensed inventories for the year are stated in note 9 'Operating expenses by type.'

Note 17 Prepaid expenses and accrued income

		31 Dec 2010 31 Dec 2009
Accrued income	2,581	4,061
Prepaid rent	2,326	–
Prepaid licenses	1,543	3,010
Prepaid insurance	557	1,678
Prepaid lease payments	610	592
Other prepaid expenses	550	490
Övriga förutbetalda kostnader	2,874	3,500
	11,041	13,331

Note 18 Equity

Group			Share class A
Share capital (thousands of shares)			31 Dec 2010 31 Dec 2009
Issued as of 1 January		9,624	9,624
New share issue		19,248	–
Issued as of 31 December—paid up		28,873	9,624

As of 31 December 2010, registered share capital comprised 28,872,600 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 2010. Shareholders are entitled to dividends, and shareholdings confer the voting rights of one vote per share at the AGM.

Rights issue

NOTE conducted a new share issue with preferential rights in the year with each share held on the record date conferring entitlement to subscribe for two new shares. This issue was fully subscribed and a total of 19,248,400 shares were issued, each with a quotient value of SEK 0.50. This raised a total of SEK 86.6 m gross in new capital for the company, or SEK 79.4 m net deducting for costs of SEK 7.2 m relating to the new issue.

Other paid-up capital

Equity that is contributed by the owners. This includes a portion of share premium reserves transferred to the statutory reserve as a 31 December 2005 and a premium of SEK 4 per share in the rights issue of 2010, less issue expenses.

Reserves

Translation reserve 31 Dec 2010 31 Dec 2009		31 Dec 2010 31 Dec 2009
Opening translation reserve	5,786	9,459
Translation differences for the year	–10,184	–3,673
Closing translation reserve	–4,398	5,786

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 longterm internal loans that are equivalent to equity in subsidiaries.

Hedging reserve		31 Dec 2010 31 Dec 2009
Opening hedging reserve	–	313
Forecast cash flow hedges for the year	–159	–313
Closing hedging reserve	–159	–

The hedging reserve includes partly the cash flow hedges whose effectiveness is partly tested in accordance with 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. Its goal is for a minimum return of operating capital of 20%. For the long term and over a business cycle, profitability will also exceed the average of other mid-sized international and comparable competitors.

For the financial year 2010 the return on operating capital was –12.1 (–18.8)%.

Capital structure goal

The minimum equity ratio should be 30%.

At year-end, the equity to assets ratio was 31.1 (27.9)%. Through its external borrowings, the company is subject to covenants. For more information on covenants, please refer to note 25, 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 2010. These dividends will be subject to approval at the AGM on 28 April 2011.

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

Note 19 Earnings per share

Earnings per share		Before dilution	After dilution
	2010	2009	2010	2009
Earnings per share, SEK	–2.55	–5.14	–2.55	–5.14

The calculation of earnings per share for 2010 has been based on profit/loss for the period of SEK –61,958 (–81,019) and on a weighted average number of outstanding shares in 2010 of 24,342,155 (15,748,691). Outstanding shares for 2009 are restated for the effect of the new share issue.

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 2010 31 Dec 2009
Non-current liabilities
Bank loans	1,475	–
Finance lease liabilities, machinery	3,191	13,977
	4,666	13,977
Current liabilities
Overdraft facility	24,863	68,410
Factoring	146,532	136,281
Short-term portion of bank loans	2,518	–
Short-term portion of finance lease liabilities	9,801	13,464
Other loans	18,526	19,407
	202,240	237,562

Pledged assets

24,679 (27,571) of collateral for bank loans, finance lease liabilities and overdraft facilities is pledged in the company's land and buildings (see also note 13) and 212,192 (261,581) in operations. Collateral for factoring is issued at an amount of 188,064 (189,441) in pledged accounts receivable—trade.

Fair value of non-current liabilities	Carrying amount		Fair value
	2010	2009	2010	2009
Finance lease liabilities, machinery	3,191	13,977	3,073	13,059

The fair value of current liabilities corresponds to their carrying amount, because the discounting effect is not significant. Fair value is based on discounted cash flow with interest based on average loan interest of 8.4 (7.2)%.

Finance lease liabilities

Finance lease liabilities are due for payment as follows:

	Minimum lease pay ments 2010	Interest 2010	Prin cipal 2010	Minimum lease pay ments 2009	Interest 2009	Prin cipal 2009
Within one year	9,801	1,078	8,723	13,464	2,154	11,310
Between one and five years	3,191	351	2,840	13,977	2,236	11,741
	12,992		1,429 11,563	27,441	4,390	23,051

For more information, see note 25 Financial risks and finance policy on page 55.

Note 21 Pension commitments

Defined-benefit pension plans			31 Dec 2010 31 Dec 2009
Present value of traditional assurance commitments		–	15,658
Un-reported actuarial losses		–	–2,910
Pension provisions		–	12,748
Changes to the commitment for defined-benefit plans reported in the Balance Sheet		2010	2009
Commitment for defined-benefit plans as of 1 January		12,748	11,961
Cost of employment in the current period and interest expense (see below)		328	836
Pension payments		–	–49
Pension plan taken over by Alecta		–13,076	–
Commitment for defined-benefit plans as of 31 December		–	12,748
Expense reported in Income Statement		2010	2009
Cost related to employment in the current period		328	128
Interest expense on commitment		–	623
Actuarial losses(+)/gains(–)		–	85
Total net expense in Income Statement		328	836
The measured expense for 2011 amounts to – (753)
Expense reported in the following Income Statement lines		2010	2009
Cost of sold goods and services		–	209
Selling expenses		–	376
Administrative expenses		328	251
Total net expense in Income Statement		328	836
Historical information	2010	2009	2008 2007

Assumptions for defined-benefit commitments

Present value of traditional assurance

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

		31 Dec 2010 31 Dec 2009
Discount rate as of 31 December, %	–	4.0
Salary increase, %	–	3.5
Income basic amount, %	–	3.5
Staff turnover, %	–	7.1
Inflation, %	–	2.0
Remaining length of service, years	–	14.1

commitments – 15,658 14,768 14,636 Experience-based adjustment loss –/gain + – –2,910 –2,398 –1,291

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 2010, 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 3.8 (4.5) m. Alecta's surplus can be divided between policy-holders and/or beneficiaries. At year-end 2010, Alecta's surplus, expressed as a collective consolidation ratio was 146 (141)%. This collective consolidation ratio comprises the market value of Alecta's assets as a percentage of insurance commitments calculated in accordance with 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.

	2010	2009
Expenses for defined-contribution plans 1	16,249	16,808

1 Includes 3,790 (4,514) for an ITP plan insured with Alecta, see above.

Note 22 Provisions

Long-term portion of provisions		31 Dec 2010 31 Dec 2009
Pensions	–	12,748
Other	–	153
	–	12,901
Short-term portion of provisions		31 Dec 2010 31 Dec 2009
Expenses for restructuring measures	12,628
		32,134
Expenses for resigning CEO	4,256	6,130
Other	31	34

Expenses for restructuring measures:

In the year, NOTE executed extensive structural actions to reduce its costs and increase capacity utilisation. At year-end 2009, it sold its operation in Skellefteå, Sweden. After relocating production to other units of the group, the plants at Skänninge, Sweden and Tauragé, Lithuania were closed in the summer and autumn respectively. The operation at Gdansk, Poland, was closed as planned at year-end 2010.

The provision for restructuring measures on 31 December 2010 essentially consisted of estimated costs for personnel and discontinued operations, and the majority is expected to be consumed in the first half-year 2011.

			Expenses for
2009	Restructuring	Pensions	resigning CEO /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

Expenses for Pensions resigning CEO /other Total	Restructuring	2010
32,134 12,748 6,317 51,199		Carrying amount at beginning of period
41,229 328 5,230 46,787		Provisions in the period
–53,879 –13,076 –7,260 –74,215		Amounts utilised in the period*
–6,856 – – –6,856		Un-utilised amounts reversed in the period
12,628 – 4,287 16,915		Carrying amount at end of period

* Includes reclassifications to other lines of the Balance Sheet of –27,000.

Note 23 Other current liabilities

		31 Dec 2010 31 Dec 2009
Staff withholding tax	7,812	8,520
Social security contributions	5,557	5,613
VAT	15,460	13,838
Other	4,746	7,643
	33,575	35,614

Note 24 Accrued expenses and deferred income

		31 Dec 2010 31 Dec 2009
Accrued salaries and benefits	6,945	10,332
Accrued social security contributions	5,125	8,008
Payment for vacation taken in cash	19,003	20,488
Other	12,885	7,939
	43,958	46,767

Note 25 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 conducted 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's funding consists of a combination of factoring and traditional overdraft facilities. Pledged accounts receivable—trade were SEK 188 (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, average interest of 3.3 (2.8)% was charged to consolidated profit/loss.

NOTE has agreed on a number of covenants to its lender as security for the liabilities. These are based on profit/loss, interest coverage ratio, equity to assess ratio, working capital and net debt, and measured quarterly. All covenants were satisfied at year-end.

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 217.0 m of equity and interest-bearing liabilities of SEK 206.9 m, utilised overdrafts of SEK 24.9 m are included. The un-utilised overdraft facility was SEK 33.3 m at year-end. Financial liabilities comprise loans and the utilised portion of the overdraft and factoring facilities.

Age analysis, financial liabilities

2010, SEK m	Total	Within 1 mth.	1–3 mth.	3 mth.– 1 yr.	1–5 yr.	5 yr. and longer
Bank credit facilities includ ing overdraft & factoring	175.4	0.1	1.3	172.5	1.5	–
Finance lease liabilities	13.0	2.1	2.3	5.4	3.2	–
Accounts payable—trade	172.0	129.0	37.8	5.2	–	–
Other financial liabilities	18.5	18.5	–	–	–	–
Total	378.9	149.7	41.4	183.1	4.7	–
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	–	–

Interest risks

Interest risk is the risk that the value of a financial instrument varies due to changes in market 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 a 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 (51)% of sales. The group has a relatively good diversification of customers across a range of industrial sectors.

Age analysis, accounts receivable—trade	2010	2009
Not overdue accounts receivable—trade	207,977	198,308
Overdue accounts receivable—trade 0–30 days	23,213	26,694
Overdue accounts receivable—trade >30 days–60 days	1,935	1,584
Overdue accounts receivable—trade >60 days	5,488	7,560
Impaired accounts receivable—trade	–4,263	–2,275
Total	234,350	231,871

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 0.6 (–) 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.

Materials risks

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

Translation exposure

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

	31 Dec 2010			31 Dec 2009
Currency	Amount	%	Amount	%
CNY	5,024	2.3	1,085	0.5
EEK	1,329	0.6	1,365	0.7
EUR	10,204	4.7	10,883	5.2
GBP	2,058	0.9	860	0.4
LTL	1,211	0.6	5,840	2.8
NOK	6,364	2.9	4,298	2.0
PLN	801	0.4	26,598	12.6
USD	0	0.0	3,913	1.9
	26,991	12.4	54,842	26.1

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 comprehensive income
Market risk, SEK m	Change, 2%	Change, 5%
Change in sales price to customers	17.8	44.6
Change in sales volume	4.9	12.2
Change in materials price *	10.7	26.7
Change in payroll overheads	4.3	10.8
Change in interest rates	2.6	6.4
Change in exchange rates on customer and supplier liabilities as of 31 Dec 2010	0.1	0.2
Currency change on net assets in foreign subsidiaries	0.5	1.3

* Disregarding price adjustment clauses to customers.

Note 26 Financial instruments by category

31 Dec 2010	Loans and accounts receivable	Instruments measured at fair value via the Income Statement	Derivatives used for hedging purposes	Other financial liabilities	Total
Assets in the Balance Sheet
Derivative instruments	–	–	–		–
Accounts receivable—trade and other financial receivables	264,838	–	–		264,838
Cash and cash equivalents	33,682	–	–		33,682
Total assets	298,520	–	–		298,520
Liabilities in the Balance Sheet
Interest-bearing liabilities		–	–	206,906	206,906
Derivative instruments		–	556	–	556
Accounts payable—trade and other financial liabilities		–	–	171,945	171,945
Total liabilities		–	556	378,851	379,407

31 Dec 2009	Loans and accounts receivable	Instruments measured at fair value via the Income Statement	Derivatives used for hedging purposes	Other financial liabilities	Total
Assets in the Balance Sheet
Derivative instruments	–	–	–		–
Accounts receivable—trade and other financial receivables	231,871	–	–		231,871
Cash and cash equivalents	24,416	–	–		24,416
Total assets	256,287	–	–		256,287
Liabilities in the Balance Sheet
Interest-bearing liabilities		–	–	251,539	251,539
Derivative instruments		–	–	–	–
Accounts payable—trade and other financial liabilities		–	–	153,917	153,917
Total liabilities		–	–	405,456	405,456

Note 27 Operating leases

		31 Dec 2010 31 Dec 2009
Lease arrangements payable within one year	4,083	4,886
Lease arrangements payable between one and five years	7,219	9,517
	11,302	14,403

Group expenses for operating leases were 6,227 (6,365).

Note 28 Ställda säkerheter och eventualförpliktelser

		31 Dec 2010 31 Dec 2009
Pledged assets
In the form of pledged assets for own liabilities and provisions
Property mortgage	24,679	27,571
Floating charge (approx.)	220,242	261,581
Factored accounts receivable—trade	188,064	189,441
	432,985	478,593
Contingent liabilities
Guarantee commitments, FPG/PRI	–	242
County administrative board, conditional loan	1,014	1,459
	1,014	1,701

Note 29 Close relations

Close relation	Yr.	Sale of goods and services to related parties	Purchases from related parties of an operating character	Liability to related party as of 31 December	Receivable from related party as of 31 December
Companies owned by Board member	2010	–	3,325	–	–
Companies owned by Board member	2009	–	–	–	–
Senior management	2010	–	3,134	–	–
Senior management	2009	–	2,932	–	–
Joint venture	2010	21,761	50,185	–	–
Joint venture	2009	31,953	88,527	8,687	16,136

Transactions with key staff in executive positions

For the Board of Directors', the CEOs' and other senior managers' 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 48.

Note 30 Cash Flow Statement

Interest paid	2010	2009
Interest received	442	1,418
Interest paid	–6,469	–4,725
Other non-cash items	2010	2009
Impairment losses	11,928	6,544
Unpaid loan receivables	–33,084	–
Unrealised exchange rate differences	1,469	–527
Capital gain/loss on sale of property, plant and equipment	3,923	477
Capital gain/loss on sale of operation/subsidiary	–1,192	11,807
Pension provisions	–	836
Other provisions	10,099	16,573
Other items not affecting liquidity	235	962
	–6,622	36,672
Sale of operation, subsidiary and joint ventures	2010	2009
Sold assets and liabilities
Intangible assets	388	–
Property, plant and equipment	5,327	1068
Inventories	12,577	8,739
Trade receivables	15,688	–
Cash and cash equivalents	533	–
	34,513	9,807
Current trade liabilities	27,251	2,139
	27,251	2,139
Sales price	8,454	–4,139
Less vendor notes	–2,000	4,139
Cash and cash equivalents in sold operation	–533	–
Effect on cash and cash equivalents	5,921	–
Purchase of subsidiaries and joint ventures	2010	2009
Purchased assets and liabilities
Intangible assets	–	3,607
Property, plant and equipment	–	7,015
Financial assets	–	239
Inventories	–	6,462
Trade receivables	–	23,072
Cash and cash equivalents	–	1,643
	–	42,038
Provisions	–	266
Current interest-bearing liabilities	–	15,246
Current trade liabilities	–	20,048
	–	35,560
Purchase price	–	–6,478
Cash and cash equivalents in purchased operation	–	1,643
Effect on cash and cash equivalents	–	–4,835
Cash and cash equivalents		31 Dec 2010 31 Dec 2009
Cash and bank balances	33,682	24,416
	33,682	24,416
Un-utilised credits		31 Dec 2010 31 Dec 2009
Un-utilised credits	33,311	26,323

Note 31 Significant estimates and judgements

Critical judgements when applying the group's accounting policies

Some critical accounting estimates made when applying the group's accounting policies 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. The obsolescence reserve on the reporting date 31 December 2010 was SEK –12.3 (–35.6) m and the reserve for doubtful debt was SEK –4.3 (–2.3) m. Note 25 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. Goodwill is subject to impairment tests in accordance with IAS 36 Impairment of Assets. On the reporting date 31 December 2010, goodwill on consolidation was SEK 70.5 (71.2) m. 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 carry-forwards in foreign subsidiaries. On the reporting date 31 December 2010, the consolidated deferred tax asset was SEK 29.0 (28.4) m. Note 11 states more information on the group's deferred tax assets.

Note 32 Post-balance sheet events

The group has no significant events to report after the end of the financial year.

Parent Company Income Statement

SEK 000	NOTE	2010	2009
Net revenue		40,500	45,901
Cost of sold services		–29,866	–39,493
Gross profit/loss		10,634	6,408
Selling expenses		–7,998	–10,644
Administrative expenses		–14,008	–21,188
Other operating revenue	2	2,103	2,476
Other operating expenses	3	–2,048	–4,347
Operating profit/loss	4, 5, 17, 19	–11,317	–27,295
Profit/loss from financial items	6
Profit/loss from participations in group companies		–83,816	5,283
Interest income, etc.		4,115	2,999
Interest costs, etc.		–15,651	–6,236
Profit/loss after financial items		–106,669	–25,249
Appropriations	7	–	48,108
Profit/loss before tax		–106,669	22,859
Tax	8	5,942	–4,907
Profit/loss after tax		–100,727	17,952

Parent Company Statement of Comprehensive Income

SEK 000	2010	2009
Profit/loss after tax	–100,727	17,952
Other comprehensive income
Group contribution received	37,000	6,800
Group contribution paid	–34,960	–35,100
Tax attributable to group contribution received/paid	–535	7,443
Total other comprehensive income	1,505	–20,857
Total comprehensive income for the year	–99,222	–2,905

Parent Company Balance Sheet

SEK 000	NOTE	31 Dec 2010	31 Dec 2009
ASSETS
Non-current assets
Intangible assets	9	–	898
Property, plant and equipment	10	51	1,972
Financial assets
Participations in group companies	20	229,817	263,366
Participations in joint ventures	21	–	24,636
Deferred tax asset		7,868	2,463
Other receivables	11	8,000	2,086
Receivables from group companies	11	85,166	50,234
Total financial assets		330,851	342,785
Total non-current assets		330,902	345,655
Current assets
Short-term receivables
Accounts receivable—trade		16	–
Receivables from group companies	12	100,220	111,597
Other receivables	13	25,017	5,418
Prepaid expenses and accrued income		3,011	1,031
Total short-term receivables		128,264	118,046
Cash and bank balances	22	11,778	4,816
Total current assets		140,042	122,862
TOTAL ASSETS		470,944	468,517
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital (28,872,600/9,624,200 class A shares)		14,436	4,812
Statutory reserve		217,923	148,161
Non-restricted equity
Profit/loss brought forward		105,646	86,189
Profit/loss after tax Total equity		–100,727 237,278	17,952 257,114
Un-taxed reserves		–	–
Provisions	15	4,256	6,130
Non-current liabilities
Liabilities to group companies		–	6,760
Total non-current liabilities		–	6,760
Current liabilities
Liabilities to credit institutions	14	20,902	64,845
Accounts payable—trade		1,458	365
Liabilities to group companies		199,950	126,300
Liabilities to joint ventures	19	–	7
Other liabilities		1,601	222
Accrued expenses and deferred income	16	5,499	6,774
Total current liabilities		229,410	198,513
TOTAL EQUITY AND LIABILITIES		470,944	468,517
Pledged assets and contingent liabilities for parent company
Pledged assets	18	–	–
Contingent liabilities	18	23,099	29,410

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 2009	4 812	148 161	121 248	–14 203	260 018
Appropriation of profits	–	–	–14,203	14,203	–
Comprehensive income
Profit/loss after tax	–	–	–	17,952	17,952
Other comprehensive income
Group contribution received	–	–	6,800	–	6,800
Group contribution paid	–	–	–35,100	–	–35,100
Tax relating to items recognised directly in equity	–	–	7,443	–	7,443
Total comprehensive income	–	–	–20,857	17,952	–2,905
Closing equity, 31 Dec 2009	4,812	148,161	86,189	17,952	257,114

	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 2010	4,812	148,161	86,189	17,952	257,114
Appropriation of profits			17,952	–17,952	–
Comprehensive income
Profit/loss after tax	–	–	–	–100,727	–100,727
Other comprehensive income
Group contribution received	–	–	37,000	–	37,000
Group contribution paid	–	–	–34,960	–	–34,960
Tax relating to items recognised directly in equity	–	–	–535	–	–535
Total comprehensive income	–	–	1,505	–100,727	–99,222
Transactions with shareholders
New share issue	9,624	76,994	–	–	86,618
Costs relating to new share issue	–	–7,232	–	–	–7,232
Closing equity, 31 Dec 2010	14,436	217,923	105,646	–100,727	237,278

Parent Company Cash Flow Statement

SEK 000	NOTE	2010	2009
Operating activities	22
Profit/loss after financial items		–106,669	–25,249
Reversed depreciation		902	1,360
Other non-cash items		62,264	6,131
Tax paid		833	–2,148
		–42,670	–19,906
Cash flow from change in working capital
Increase (–)/decrease (+) in trade receivables		–3,202	170,519
Increase (+)/decrease (–) in trade liabilities		26,016	37,214
		22,814	207,733
Cash flow from operating activities		–19,856	187,827
Investing activities
Sale of property, plant and equipment		–	193
Sale of intangible assets		–	1,928
Investments in subsidiaries		–	–43,289
Investments in joint venture		–	–5,587
Sale of subsidiary/joint venture		5,454	–
Sale of business line		1,000	–
Purchase of other financial assets		–19,675	–
Sale of financial assets		4,596	–
Cash flow from investing activities		–8,625	–46,755
Financing activities
Borrowings		35,000	50,000
New share issue		79,386	–
Amortisation of loans		–78,943	–199,246
Cash flow from financing activities		35,443	–149,246
Cash flow for the year		6,962	–8,174
Cash and cash equivalents
At beginning of period		4,816	12,990
Cash flow before financing activities		–28,481	141,072
Cash flow from financing activities		35,443	–149,246
Cash and cash equivalents at end of period		11,778	4,816

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 in accordance with the Swedish Annual Accounts Act and RFR's (Rådet för finansiell rapportering, the Swedish Financial Reporting Board) recommendation RFR 2, Accounting for Legal Entities. RFR's statements for listed companies have also been adopted. RFR 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 in accordance with 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. In accordance with IFRS, these obligations are classified as financial guarantee agreements. For such agreements, the parent company applies the relaxation of RFR 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 in accordance with Chap. 2 §4 of the Swedish Annual Accounts Act when the services are complete. All parent company sales are to other group companies.

Property, plant and equipment

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 in accordance with 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 in accordance with statements from the RR Emerging Issues Task Force. Shareholders' contributions are recognised 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 in accordance with their economic substance, which means that group contributions paid with the aim of minimising the group's total tax are recognised directly against retained profits less deductions for their current tax effect.

Note 2 Other operating revenue

	2010	2009
Gains on sale of non-current assets	1,987	–
Exchange gains on trade receivables/liabilities	116	2,476
	2,103	2,476

Note 3 Other operating expenses

	2010	2009
Loss on sale/retirement of non-current assets	–2,018	–
Exchange losses on trade receivables/liabilities	–30	–4,347
	–2,048	–4,347

Note 4 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits

	2010	2009
Salaries and benefits	–4,869	–17,760
Pension expenses, defined-contribution plans	–1,007	–4,486
Social security contributions	–1,802	–6,653
	–7,678	–28,899

Restructuring costs

Expenses for employee benefits include restructuring costs and provisioning for the departing CEO of – (9,347). Restructuring costs also include consulting fees to the former CEO of SEK 5.2 m.

Average number of employees		2010 Of which men		2009 Of which men
Sweden	7	45%	14	50%
	7	45%	14	50%

Division between sexes in management	2010 Share of women	2009 Share of women
Board of Directors	0%	0%
Other senior management 5 (6) people	0%	0%

Salaries, other benefits and social security contributions

	2010		2009
	Salaries & benefits (of which bonus)	Social security contribu tions (of which pension expense)	Salaries & benefits (of which bonus)	Social security contribu tions (of which pension expense)
Management	–3 043	–1 712	–9 762	–6 528
	(–)	(–608)	(–)	(–2 896)
Other employees	–1 826	–1 097	–8 723	–4 836
	(–)	(–399)	(–)	(–1 590)

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 0.2 (0.3)%. No information by sex and age group is disclosed because it could be related to individuals.

Note 5 Auditors' fees and reimbursement

	2010	2009
PwC
Auditing assignment	–380	–740
Auditing in addition to audit assignment	–70	–17
Tax consultancy	–4	–3
Other services	–665	–35

Note 6 Net financial income/expense

	2010	2009
Profit/loss from participations in group companies
Impairment of shares in subsidiaries	–70,953	–
Capital gains from the sale of shares in group companies	–19,233	–
Dividend from group companies	6,370	5,283
	–83,816	5,283
Interest income, etc.
Interest income, group companies	1,432	2,997
Exchange rate differences	1,394	–
Interest income, other	1,289	2
	4,115	2,999
Interest costs, etc.
Interest costs, group companies	–	–1,655
Interest costs, other	–1,953	–2,101
Exchange rate differences	–10,963	–2,480
Other	–2,735	–
	–15,651	–6,236

Note 7 Appropriations

	2010	2009
Tax allocation reserve, provision/dissolution for the year	–	48,108
	–	48,108

Note 8 Tax

Reported in Income Statement			2010	2009
Current tax expense (–)/tax revenue (+)
Tax expense/tax revenue for the period			537	–7,443
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			5,399	2,463
Restatement of tax attributable to previous year			6
Total reported tax			5,942	–4,907
Reconciliation of effective tax	%	2010	%	2009
Profit/loss before tax		–106,669		22,859
Tax at applicable rate for parent company	26.3	28,054	26.3	–6,012
Non-deductible expenses		–22.3 –23,794	0.4	–87
Non-taxable revenue	1.6	1,676	–6.1	1,389
	–	–	1.2	–270
Standard interest on tax allocation reserve
Tax attributable to previous year	0.0	6	–0.3	73

Tax items reported directly against equity	2010	2009
Current tax in group contributions received/paid	–535	7,443
	–535	7,443

Note 9 Intangible assets

The useful life of goodwill is indeterminable while the useful lives of other intangible assets are determinable and conform 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, purchased
Cumulative cost
Opening balance, 1 Jan 2009	4,342
Investments	44
Sales and retirements	–2,960
Closing balance, 31 Dec 2009	1,426
Opening balance, 1 Jan 2010	1,426
Sales and retirements	–1,426
Closing balance, 31 Dec 2010	–
Accumulated amortisation
Opening balance, 1 Jan 2009	–542
Amortisation for the year	–974
Sales and retirements	988
Closing balance, 31 Dec 2009	–528
Opening balance, 1 Jan 2010	–528
Amortisation for the year	–357
Sales and retirements	885
Closing balance, 31 Dec 2010	–
Carrying amounts
As of 1 Jan 2009	3,800
As of 31 Dec 2009	898
As of 1 Jan 2010	898
As of 31 Dec 2010	–

Amortisation and impairment

Amortisation is included in the following Income Statement lines	2010	2009
Cost of goods sold and services	–357	–974
Administrative expenses	–	–
Selling expenses	–	–
	–357	–974

Note 10 Property, plant and equipment

	Equipment, tools, fixtures and fittings
Cost
Opening balance, 1 Jan 2009	3,219
Sales and retirements	–265
Closing balance, 31 Dec 2009	2,954
Opening balance, 1 Jan 2010	2,954
Sales and retirements	–2,558
Closing balance, 31 Dec 2010	396
Depreciation
Opening balance, 1 Jan 2009	–668
Depreciation for the year	–386
Sales and retirements	72
Closing balance, 31 Dec 2009	–982
Opening balance, 1 Jan 2010	–982
Depreciation for the year	–545
Sales and retirements	1,182
Closing balance, 31 Dec 2010	–345

Note 12 Short-term receivables from group companies and joint ventures

	group companies	Receivables from	Receivables from joint ventures
	31 Dec 2010	31 Dec 2009	31 Dec 2010	31 Dec 2009
Cumulative cost
At beginning of year	111,597	276,005	–	452
Loans	49,195	58,100	–	–
Overdraft facility Accounts receivable —trade, short-term receivables	25,271 25,754	31,175 22,322	– –	– –
Re-paid liabilities	–111,597	–276,005	–	–452
	100,220	111,597	–	–

Note 13 Other receivables

	31 Dec 2010	31 Dec 2009
Interest-bearing receivable	24,488	–
VAT receivable	392	4,397
Other short-term receivables	137	1,021
	25,017	5,418

Not 14 Räntebärande skulder

	31 Dec 2010	31 Dec 2009
Current liabilities
Overdraft facility	17,829	63,090
Other interest-bearing liabilities	3,073	1,755
	20,902	64,845

Note 15 Provisions

	31 Dec 2010	31 Dec 2009
Carrying amount at beginning of period	6,130	–
Provisions made in the period	5,230	8,803
Amounts utilised in the period	–7,104	–2,673
Carrying amount at end of period	4,256	6,130
Of which total long-term portion of provisions	–	–
Of which total short-term portion of provisions	4,256	6,130

The parent company's provisions are for salary and severance pay for the departing CEO.

Note 16 Accrued expenses and deferred income

	31 Dec 2010	31 Dec 2009
Accrued consulting fees	2,155	1,418
Accrued salaries and benefits	848	1,050
Accrued social security contributions	772	2,367
Payment for vacation taken in cash	882	1,061
Other	842	878
	5,499	6,774

Depreciation and impairment

Carrying amounts

Depreciation is included in the following Income Statement lines	2010	2009
Cost of goods sold and services	–180	–
Administrative expenses	–181	–193
Selling expenses	–184	–193
	–545	–386

1 Jan 2009 2,551 31 Dec 2009 1,972

1 Jan 2010 1,972 31 Dec 2010 51

Note 11 Long-term receivables

	31 Dec 2010	31 Dec 2009
Long-term receivables
Receivables from group companies	85,166	50,234
Interest-bearing receivables	6,000	–
Other long-term receivables	2,000	2,086
	93,166	52,320
Cumulative cost
Long-term receivables
At beginning of year	52,320	53,941
Purchase	65,493	6,921
Re-payment	–24,647	–8,542
	93,166	52,320

Note 17 Operating leases

Note 18 Pledged assets and contingent liabilities

		31 Dec 2010 31 Dec 2009
Lease arrangements payable within one year	72	215
Lease arrangements payable between one and five years	108	860
	180	1,075

	31 Dec 2010 31 Dec 2009
Contingent liabilities
Guarantee commitments, FPG/PRI	–	12,748
Sureties in favour of subsidiaries	23,099	16,662
	23,099	29,410

Parent company expenses for operating leases were 186 (712).

Note 19 Close relations

Close relation	Yr.	Sale of goods and services to related parties	Purchases from related parties	Liability to related party as of 31 December	Receivable from related party as of 31 December
Company owned by Board member	2010	–	3,325	–	–
Company owned by Board member	2009	–	–	–	–
Senior management	2010	–	3,134	–	–
Senior management	2009	–	2,368	–	–
Joint venture	2010	–	–	–	–
Joint venture	2009	–	–	7	–

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 2010 Carrying amount	31 Dec 2009 Carrying amount
NOTE Norrtelje AB, 556235-3853, Norrtälje, Sweden	1,000	60,719	50,000
NOTE Lund AB, 556317-0355, Lund, Sweden	10,661	43,091	42,491
NOTE Components Gdansk Sp. z o.o, 583-26-15-588, Gdansk, Poland	333	0	34,197
IONOTE EMS Ltd, CR-134187, Tangxia	9,000,000	0	25,122
NOTE Pärnu OÜ, 10358547, Pärnu, Estonia	1	26,887	23,438
NOTE Norge AS, 982 609 380, Oslo, Norway	1,000	22,354	22,354
NOTE Nyköping-Skänninge AB, 556161-4339, Skänninge, Sweden	9,000	8,190	19,509
NOTE Skellefteå AB, 556430-0183, Skellefteå, Sweden	5,000	16,078	16,078
NOTE UK Ltd, 5257074, Telford, England	1,850,000	14,237	14,237
NOTE Borås AB, 556567-6193, Borås, Sweden	–	–	5,000
NOTE Tauragé UAB, 1076886, Tauragé, Lithuania	15,000	0	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	1,500
IONOTE Electronics (Dongguan) Ltd, 441900400100981, Dongguan, China	1	32,214	1,202
NOTE International AB, 556655-6782, Danderyd, Sweden	1,000	100	616
NOTE Components AB, 556602-2116, Danderyd, Sweden	1,000	100	100
		229,817	263,366

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 2010 31 Dec 2009
At beginning of year	266,266	204,328
Sales	–7,900	–
Investments/acquisitions	42,404	61,938
	300,770	266,266
Accumulated impairment losses
At beginning of year	–2,900	–2,900
Sales	2,900	–
Impairment for the year	–70,953	–
	–70,953	–2,900
	229,817	263,366

Note 21 Parent company participations in joint ventures

	Joint ventures
Cumulative cost		31 Dec 2010 31 Dec 2009
At beginning of year	24 636	37 698
Acquisitions/investments	–	5 586
Transferred to subsidiaries	–	–18 648
Closing balance, 31 December	–24 636	–
Utgående balans 31 december	–	24 636

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

2010	Vote and share of equity, %	Carrying amount
NOTEFideltronik S.A., 120621500, Krakow	–	–
2009
NOTEFideltronik S.A., 120621500, Krakow	50	24,636

Note 22 Cash Flow Statements

Interest paid and dividend received	2010	2009
Interest received	2,721	2,999
Interest paid	–1,948	–3,256
Dividend received	6,370	5,283
Other non-cash items
	2010	2009
Other provisions	5,230	6,130
Capital gain on sold non-current assets	1,917	–
Capital gain on sale of operation/subsidiary	17,246	–
Unpaid vendor note receivables	–33,084	–
Impairment of shares and subsidiaries	70,953	–
Other items not affecting liquidity	2	1
	62,264	6,131
Cash and cash equivalents	31,Dec,2010,	31,Dec,2009
Cash and bank balances	11,778	4,816
	11,778	4,816
Un-utilised credits	31,Dec,2010,	31,Dec,2009
Un-utilised credits	27,171	16,910

Note 23 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 2010 comprise the parent company and its subsidiaries, collectively termed the group.

The Board of Directors and CEO hereby certify that the consolidated accounts have been prepared in accordance with 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 in accordance with 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, 1 April 2011

Stefan Charette Chairman

Kjell-Åke Andersson Bruce Grant Göran Jansson

Board member Board member Board member

Henry Klotz Christoffer Skogh Board member Board member/Employee representative

Peter Lavesson

CEO and Deputy Chairman

As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 1 April 2011. 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 28 April 2011.

Our Audit Report was presented on 4 April 2011

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 2010. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 29–67. 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. A corporate governance report has been prepared. The statutory administration report and corporate governance report are 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, 4 April 2011

Öhrlings PricewaterhouseCoopers AB

Magnus Brändström Anders Magnussen Senior Auditor 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 Hyvinkää Avainkierto 3 05840 Hyvinkää Finland

NOTE Lund Maskinvägen 3 227 30 Lund Sweden

NOTE Norge Jogstadveien 21 2007 Kjeller Norway

www.note.eu info@note.eu NOTE Norrtelje Box 185 Vilhelm Mobergs gata 18 761 22 Norrtälje Sweden

NOTE Pärnu Laki 2 80010 Pärnu Estonia

NOTE Torsby Inova Park 685 29 Torsby Sweden

NOTE UK Stroudwater Business Park Brunel Way Stonehouse Gloucestershire GL10 3SX England

IONOTE Electronics 6 Ling Dong Road Lin Cun Industrial Center Tangxia Dongguan Guangdong Province, P.R.C. 523710 China

Swedish and English-language versions of this Report have been produced. In the event of any discrepancy between the two, the Swedish version shall apply.

NOTE AB (PUBL) Annual Report 2010 Corporate identity number 556408-8770

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