NOTE — Annual Report 2013

Feb 28, 2014

Annual Report 2013

Contents

INTRODUCTION

This is NOTE	2
Milestones in NOTE's history	2
This year in brief	4
CEO's statement	6

OPERATIONS

Vision, business concept, strategy and targets	8
Business model	10
Market and competitors	12
Risk management	14
Quality, environment and ethics	15
Human resources	18
Organisation and group management	20
Five year summary	21
THE NOTE SHARE
Share data and shareholders	22
FORMAL ANNUAL ACCOUNTS
Corporate Governance Report	25
Report of the Directors	32
Consolidated financial statements	36
Parent company financial statements	54
Audit report	63

Addresses 64

Shareholders' information

Annual General Meeting

The AGM (Annual General Meeting) will be held at 2:00 p.m. on Friday, 25 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 jointly 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 17 April, and notify NOTE of their intention to participate by no later than 17 April.

Business

Information on the agenda of the AGM is published in the Swedish Official Gazette and will be available on NOTE's website. Documentation is also available from NOTE coincident with notification of intention to participate at the Meeting.

Dividend

The Board of Directors is proposing that no dividend is paid to shareholders for the financial year 2013.

Nomination committee

The Nomination Committee has the following members:

Kjell-Åke Andersson peronal holdings

Bruce Grant Garden Growth Capital LLC

Daniel Nyhrén Creades AB

Peter Zonabend Banque Carnegie Luxembourg S.A.

Financial information

Calendar

		Interim Report, Jan–Mar 2014 25 Apr 2014
	Interim Report, Jan–Jun 2014	14 Jul 2014
		Interim Report, Jan–Sep 2014 20 Oct 2014

Ordering financial information

Financial and other relevant information can be ordered from NOTE. Out of consideration for the environment, a subscription service is readily available from NOTE's website. Website: www.note.eu Email: info@note.eu Tel: +46 (0)8 568 99000 Address: NOTE AB (publ), Box 711, 182 17 Danderyd, Sweden

Investor relations contacts

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

Henrik Nygren Chief Financial Officer Tel: +46 (0)8 568 99003, +46 (0)70 977 0686

Email: henrik.nygren@note.eu

This is NOTE

NOTE offers manufacturing and logistics services for electronics products across complete product lifecycles—from design to after-sales.

NOTE is one of the leading manufacturing and logistics partners for electronics production in northern Europe. NOTE produces PCBAs, subassemblies and box build products. It has especially strong market positioning in the high mix/low volume market segment, i.e. for products in small to medium-sized batches that require high technology competence and flexibility. NOTE's offering covers the complete product lifecycles, from design to after-sales.

NOTE's business is organised to address the differing needs of its customers

optimally. NOTE's Nearsourcing Centres deliver advanced production technology services in close collaboration with customers, such as selecting materials, developing test equipment, prototyping and serial production. NOTE's Industrial Plants primarily 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 units: Sweden, Norway, Finland, UK, Estonia and China.
• Number of employees as of 31 December 2013: 851.
• Sales in 2013: SEK 907 million.
• Share: Quoted on NASDAQ OMX Stockholm (Small Cap/Industrial Goods & Services). At year-end 2013, the share price was SEK 6.50. Market capitalisation was SEK 188 million, divided between 28,872,600 shares.

Milestones in NOTE's history

1999 Company founded on the business concept of producing electronics-based products 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 international 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 acquired. The goal is to grow and conduct an IPO of the group within five years.

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

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

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

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.

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

2012 Initiative to increase direct sales from NOTE's Industrial Plants progressing well.

2013 NOTE continues to build new customer relationships. Sales growth in the fourth quarter.

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

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.

2011 Closure of the operation in Lithuania. NOTE now has Nearsourcing Centres in Sweden, Norway, Finland and the UK, and Industrial Plants in Estonia and China.

2010/2011 Holding in the joint venture in Krakow, Poland, sold at year-end.

The year in brief

January–December

• Sales were SEK 907.0 (1,029.2) million.
• Operating profit was SEK 9.0 (26.0) million. Underlying operating profit, excluding provisioning for bad debt, was SEK 17.4 (38.6) million.
• The operating margin was 1.0 (2.5) percent.
• Profit after financial items was SEK 1.2 (19.1) million.
• Profit after tax was SEK 0.7 (12.6) million, corresponding to SEK 0.02 (0.44) per share.
• Cash flow after investments was SEK -2.0 (97.0) million, corresponding to SEK -0.07 (3.36) per share
• Dividend—the Board is proposing that no dividend is paid to shareholders. In the previous year, dividend was SEK 0.75 per share, corresponding to SEK 21.7 million.

Overview of 2013, SEK million	Full year	Q1	Q2	Q3	Q4
Sales	907.0	214.8	236.1	200.8	255.3
Operating profit	9.0	0.3	3.6	–4.6	9.7
Cash flow	–2.0	–8.0	2.0	6.3	–2.3

A final provision for bad debt of SEK 8.4 million was made in the third quarter for the customer that encountered financial difficulties in 2012.

Sales, SEK million

Excluding provisioning for bad debt, the underlying operating margin was 3.0 percent for Q4 2012 and 1.9 percent for Q3 2013.

Cash flow, SEK million

CEO's statement

We continued to focus on sales growth in 2013. We extended contracts and won new business, and maintained a high tempo of establishing new business relationships. We delivered positive profit after tax for the full year and improved efficiency in tough market conditions.

2013 was an eventful year, with positive and negative events. The organisation worked hard and focused on its goals based on our operational agenda; to develop our business and customer base, improve efficiency and manage our working capital. In addition, we continued to make investments aimed at improving quality, performance and efficiency in order to strengthen and clarify our service offering.

To our employees, I'd like to say you all made an excellent contribution, and it was an honour to work alongside you in 2013. The employee satisfaction survey conducted in 2013 shows you're satisfied and proud to be part of NOTE, as I am.

We continued to face a tough cyclical phase that has affected volumes. Mainly as a result of lower project-oriented transactions, longer decision-making processes and anticipation of inventory build-ups by customers. We were also negatively affected by losing deliveries to the customer that encountered financial difficulties in 2012. A sad ending to the protracted and resource-intensive process of helping this customer make a fresh start, when we were compelled to make a further, but final, provision for this customer in the third quarter.

In 2013, annual volume reached some SEK 50 million on the basis of the customer relations established in 2012. Most of these customers are SMEs that we've provided industrialisation services for (service sales, prototypes and pilot batches). Some customer relations don't go any further, while others gradually move on to serial production. We now better understand which products and customers will contribute to future growth.

During the year, we maintained our high tempo of establishing new business relationships from 2012 and we'll work hard in 2014 to help these customers develop their business further. From what was already a high level, we improved the delivery precision to our customers further. Our quality targets also improved on last year. Overall, the services we offer our customers are strong and competitive, evidenced by the fact that 94 percent of our customers are willing to recommend us.

Progress in the year

An important and positive indicator for the future was that it became clear that our market initiatives were beginning to pay off in the autumn. Following an extended period of fading volumes, the fourth quarter saw sales growth of just over 6 percent. The increased sales were largely derived from products to fairly new customers and increased volumes in our project-oriented deals.

We also continued to prove our flexibility in terms of our cost base. Over the full year, we reduced costs by 4 percent. However, lower volumes generated low operating profit in the first half-year. Buoyed by increased sales, we achieved an operating margin of 3.8 percent in the fourth quarter. However, for the year as a whole, profitability was weak. Adjusted for the increased bad debt provision in the third quarter, operating profit was SEK 17.4 million and operating margin 1.9 percent.

One of our focus is on actions that rationalise our working capital tie-up. However, fourth-quarter sales growth, combined with investments in manufacturing rationalisations and quality, meant that cash flow (after investments) was not on par with the previous year.

Future

Our Nearsourcing business model is strong, and tailored for the high mix/low volume market segment. It is based on developing business at our Nearsourcing Centres in Sweden, Norway, Finland and the UK in close collaboration with customers. Usually, we conduct labour-intensive volume production at our Industrial Plants in Estonia and China.

We approach coming market trends and our customers' plans for the future with great humility. Our focus in 2014 will be to grow together with our customers, existing as well as new ones, by maintaining and developing the working methods and attitudes we've introduced in order to win new business, continue the streamlining process and ensure successful utilisation of working capital.

Peter Laveson

Our sales growth in the fourth quarter shows we're heading in the right direction.

Vision, business concept, strategy and targets

Vision

NOTE—the customer's obvious manufacturing and logistics partner.

Business concept

NOTE is a local northern European manufacturing and logistics partner with an international platform for manufacturing of electronics-based products that require high technology competence and flexibility across complete product lifecycles.

Strategy and business targets

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

To make the market's most competitive offering, NOTE should achieve good profitability, actively contribute to safeguarding the customer's value chains and sharpening their competitiveness through flexibility, competence and professional conduct.

Profitable growth will be achieved by:

• Expanding NOTE's customer base with new accounts with complex products and high standards.
• Strengthening NOTE's services offering to existing customers.
• Sharpening competitiveness through sector-leading quality and delivery precision, further improvements to the sourcing and logistics operation, optimising capacity utilisation and enhancing internal administrative processes.
• Executing carefully selected production take-overs and acquisitions.

Financial targets

Growth target

NOTE will increase its market shares organically and through acquisitions.

Profitability target

NOTE will grow with profitability. Its target is for a minimum return on 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 target

The minimum equity ratio should be 30 percent.

Dividend target

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

Business model

NOTE is a specialised manufacturing and logistics partner for producing electronics-based products that require high technology competence and flexibility. NOTE produces PCBAs, sub-assemblies and box build products. Its business offering builds on flexible solutions based on customer needs across complete product lifecycles, from design to after-sales.

A 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. Serial production is located where it is best from a total cost perspective. NOTE's focus is to deliver the right product at the right time, at a competitive cost. Cost of materials represents most of the total cost of a finished product. Accordingly, one important mission for NOTE is to offer competitive pricing and efficient logistics solutions for electronics components and other production materials.

NOTE's offering is especially focused on the high mix/low volume segment, which entails high flexibility in production and good product documentation. NOTE's customers are mainly in the engineering and communication industries, and in the latter, these involve complex systems for control, monitoring and security.

In box build products, NOTE develops electronic and mechanical solutions in close collaboration between the customer, supplier and the relevant NOTE units.

To sharpen competitiveness, NOTE puts a strong focus on continuously following up on and re-engineering NOTE's business processes and customer interfaces to 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. Advanced production technology engineering services are

conducted at Nearsourcing Centres in Sweden, Norway, Finland and the UK. The focus is on providing competence at the design and development stage. In close collaboration with customers, NOTE contributes valuable expertise to materials selection, producability and developing test methods and equipment, with the consistent aim of creating the best feasible product, optimised for serial production as early as in the design phase. As part of this process, product prototypes and pilot series are also manufactured to determine the product's final design. Nearsourcing Centres offer services across complete product lifecycles. In addition to industrialisation services NOTE also provides batch manufacture, state-of-the-art logistics and after-sales solutions, based on customer needs.

The geographical proximity Nearsourcing Centres offer customers is crucial when projects require ongoing contact and extensive knowledge sharing between parties. Nearsourcing also shortens time to market, which reduces capital tied-up and offers competitive edges on the market for the customer.

Nearsourcing enables high flexibility in the introduction phase for customers, before the product and market are ready for serial 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 overall cost is favourable. In this way, NOTE creates value-added for customers by avoiding many costly mistakes and re-thinks.

Customer needs and total product costs determine the location of serial production, at a Nearsourcing Centre

or an Industrial Plant. Needs may vary based on the nature of the product, the customer's market conditions, products' cost structure, the location of the product in its lifecycle, volume and geographical final market.

Cost-effective volume production at Industrial plants

Manufacture at NOTE's Industrial Plants in Estonia and China is mainly high-volume. Customer relations are either handled autonomously by Industrial Plants or by one of the Nearsourcing Centres. In the latter case, production will probably have started at a Nearsourcing Centre and then transfer at a later stage when the product and volumes have stabilised. Products and production processes are then industrialised at Industrial Plants in collaboration with Nearsourcing Centres.

NOTE has a well-developed methodology for transferring production between Nearsourcing Centres and Industrial Plants. These units work together in dedicated customer teams to monitor materials and information flows, and to offer continuous feedback to customers.

NOTE's Industrial Plants in Estonia and China are modern sites with advanced production equipment, extensive manufacturing capacity and broadbased technological competence.

Sven Klockare CEO, Bravida Fire & Security:

NOTE's strategic and competitive offering over complete product lifecycles is an extremely close fit with Bravida's high demands for quality and flexibility.

Bravida Fire & Security offers complete systems and products in fire and burglar alarms, access systems, TV monitoring and integrated security systems.

Bravida Fire & Security has extended its partnership with NOTE through a new three-year deal for the manufacture of Bravida products. The choice of NOTE as supplier also paves the way for continued collaboration in future product development.

Erik Larsson Category Manager, Cargotec Sweden AB, Hiab:

In addition to our requirement for a supplier who can bring competitive total cost to our production, we wanted one that shares our philosophy of openness, dialogue and a strong collaborative spirit. We chose NOTE and are happy with our decision.

Cargotec rationalizes cargo handling, offering systems for loading and unloading freight. Cargotec's cargo handling solutions are used in sectors including construction, forest products, manufacturing, waste management, recycling and defence.

Cargotec and NOTE have entered into a collaboration agreement and as part of their future partnership, Cargotec Hiab contracted NOTE to manufacture a number of its products.

Paul-Erik Sjöman CEO, Powernet Oy:

Our priority was to appoint a supplier with sector-leading ability to deliver high quality on time, and with a customer-focused organisational structure and highly flexible working methods.

Powernet, with its head office in Äänekoski, Finland, develops and manufactures tailored solutions for demanding power transmission applications.

In late 2012, Powernet decided to streamline its operations, opting to outsource more of its manufacture. NOTE won the assignment, taking over the manufacture of a large number of products in 2013.

PRODUCT LIFECYCLE

VALUE CHAIN

NOTE's offering covers complete product lifecycles from design to after-sales services.

*New Product Introduction, NOTE adopts a highly developed business process for customers about to launch a new product on the market. NOTE increases customer profitability by actively contributing 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. No other continent has so many high-cost countries close 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 the UK, France, Ireland, Sweden and Germany. Proceeding from these countries, the sector migrated eastwards, starting up operations in low-cost countries like Estonia, Lithuania, Poland, the Czech Republic and Hungary. The aim was more cost-efficient manufacture for Western European final markets.

The European market consists of domestic European players and major global corporations. However, 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 mainly associated with low-cost manufacture.

The market for outsourced electronics production has emerged and evolved as a consequence of growing interest in outsourcing, increased electronics content in a range of products and more 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 recovered to something more closely resembling normalised levels in 2010 and 2011, although uncertainty increased slightly once more in 2012.

Market in 2013

The year featured continued poor demand on several of NOTE's geographical markets; mainly due to lower project-oriented transactions, longer decision-making processes and anticipation of inventory build-ups by customers.

Following an extended period of fading volumes, NOTE saw sales growth of just over 6 percent in the fourth quarter. The increased sales were largely derived from products to new customers and increased volumes in NOTE's projectoriented deals.

Market trends, drivers and prospects

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.

The key drivers will probably continue to be about the search for costeffective production, rationalization and continued production transfers from west to east. But the market's demand for manufacturing services are also expected to increase. More advanced technology is expected to support the demand for increased speed from idea to finished product, and advanced logistics

will become a central component of the service portfolio to offer the flexibility that customers demand.

Decisions relating to outsourcing to low-cost countries to achieve a clear reduction in unit prices are becoming more nuanced, with the total cost perspective becoming more important. This became particularly clear in US debate in the year. Advocates of keeping production in the US have won ground on the basis of total cost and proximity considerations.

The market for manufacturing services for electronics-based products 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 control systems, measurement instruments and equipment for communication infrastructure) are often industrial products, i.e. products that customers often embed into original equipment. The demand and level of adaptation varies, setting higher standards for the flexibility of the manufacturing partner. The product lifecycles of industrial products are generally longer than for consumer products.

Sales of outsourced manufacturing in Europe and North Africa, EUR million

Sector commentator Reed Electronics Research estimates that the European market for outsourced electronics production will grow by some four percent annually through the coming years. This forecast has recently been revised down slightly, primarily linked to the weak economy in Europe.

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.

For small and mid-sized customers NOTE has put a big emphasis on creating flexible concepts that suit companies with growth ambitions. This customer category has pressing needs for competence in new product introductions, effective sourcing and opportunities to find cost-efficient production at a reasonable distance from their final market.

NOTE is perceiving continued high interest in production in China. However, as indicated above, the market is continuing to mature in terms of the rationale behind outsourcing to China.

NOTE's operation in China is well equipped to manage production transfers from Europe and new product introductions. The upscaled direct sales initiatives from NOTE's Industrial Plants have also resulted in an increased number of customers from Asia, USA and Oceania.

Globalisation and progressively accentuating competition means optimising core business and achieving short lead-times will become increasingly important. This means that businesses need a strong and competent partner in segments like product development, supply chain, industrialisation, management of complete products (box build) and after-sales services. By turning to NOTE, customers get access to this valuable competence, while also achieving economies of scale in manufacturing and sourcing.

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 regional or local players, often with a niche orientation, active on individual or several of NOTE's markets.

Risk management

Operational risks

Risk	Exposure and management
Customers The risk that a customer leaves NOTE or does not fulfil its commitments.	NOTE has a large number of active accounts, the 15 largest in sales terms represented 57 percent of its sales in 2013. 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. Accordingly, 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. Usually, materials risk is regulated through agreements with customers. NOTE follows up on material risks 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 appli cable 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 NOTE can be liable for payment due to commitments 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 and production in accordance with the customer's specifica tion. 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. NOTE has insurance cover that is assessed to be reasonable and is adapted to operational risks. Where possible and financially viable, there is insurance cover for issues including specific costs that may arise as a result of production faults.
Economic and seasonal variations	The market for outsourced electronics production is relatively young and usually considered fairly cyclical. NOTE's Near sourcing business model 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 represented 57 percent of consolidated sales in 2013. The ambition is to focus on sectors with more stable demand and relatively long product lifecycles and customer assignments.
Production downtime Downtime in production affecting deliveries to customers and causing extra costs.	Because NOTE conducts advanced manufacture of electronics, it is subject to high demands on efficient processes and state-of-the-art production equipment. The risk of production downtime is limited by production being of a similar nature across several of the group's units. Accordingly, NOTE can transfer production from one unit to another, and have its units interact on production, which limits its risks from long-term production downtime. NOTE has extensive insurance cover, including cover to minimise the loss of contributions caused by production downtime where possible and financially viable.
Competence The risk of not possessing sufficient competence in all parts of business.	NOTE provides sophisticated production services which 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 and/or reduced efficiency in administra tion and sales	NOTE's operations require IT systems that work well. NOTE has a selection of local applications and operating envi ronments with varying functionality and capacity. To improve availability, cost-efficiency and business support, NOTE conducts initiatives to consolidate and standardise these systems. Measures were also taken to improve security and control in the group's IT systems in the year.
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, and for its units to interact in produc tion.
Materials Price and access to materials.	The price and access to electronic components and other production materials vary significantly depending on market conditions. NOTE has a central organisation to deal with group-wide sourcing.
Inventories The risk of components and production materials not being consumed, and thus losing value.	NOTE has 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 variation in demand, there is a close collaboration with customers to limit the risk of obsolescence in inventories. Obsolescence risk is monitored continuously.

Financial risks

Currency The risk that a fluctuation in exchange rates affects the group's profit, cash flow or balance sheet negatively.	Against the background of an increasing share of value-added being generated in foreign units and the purchasing of electronic components and other production materials being largely in foreign currencies (EUR/USD), NOTE has fairly extensive currency management. With the aim of limiting currency risks, NOTE trades in currency forwards and similar instruments.
Customer credit The risk that a customer is unable to pay its debt to NOTE.	Generally speaking, NOTE has a diversified customer base with the largest customer representing some 9 percent of sales. In terms of NOTE's deal structures, there are some individual customers who confer relatively high exposure with regard to accounts receivable—trade and inventories, including outstanding purchase orders. Were these custo mers' solvency to deteriorate, this could have an adverse impact on NOTE's profit. Evaluations and creditworthiness checks are run on new and existing customers. Ongoing financial reporting includes close monitoring of accounts receivable—trade and inventories, including outstanding purchase orders.
Financing The risk that refinancing loans is more difficult or costly, and that accordingly, NOTE's solvency is negatively	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.

affected.

Quality, environment and ethics

Sustainability issues are integrated into NOTE's business operations. Segments covered are quality issues, environmental impact, business ethics and human rights. This work is decentralised and co-ordinated using collective targets and guidelines. NOTE is a member of the UN Global Compact, which was started on a UN initiative.

Holistic perspective raises standards

Taking an integrated approach to various 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 environmental impact of transportation is limited. When mitigating its customers' impact on the environment and wider society, NOTE works actively to limit 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 with the aim of constantly satisfying applicable standards and customer expectations. Production units work towards shared and measurable targets. For example, product quality and delivery precision are continuously measured for both customers and suppliers.

NOTE utilises a portfolio of quality assurance 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 the group's production units have ISO 9001 certification. Using its quality management system, NOTE can trace faults and continuously develop the company's methods and processes. NOTE ensures its work is functioning through regular audits, which monitor standards and procedures, by internal and external

resources. An external party verifies and certifies its management system.

Quality audits are regularly conducted on NOTE's strategic suppliers.

Environmental policy and working methods

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

Environmental work follows international ISO guidelines, mainly the ISO 14000 series. All the group's production units have ISO 14001 certification and are audited by internal and external resources.

Although different countries' environmental legislation varies, NOTE's ambition is for all units to follow a common line of environmental work. Production units sort consumables and monitor energy consumption continuously. Other parts of operations also include environmental considerations, such as in discussions with customers regarding materials sourcing and production arrangements.

Electronic scrap, glass and paper are recycled. Improvement projects reduce waste and limit energy consumption and CO2 emissions. Corrugated board and combustible waste are compacted to minimise the number of waste transportation runs affecting the environment. NOTE also co-ordinates freight agreements in the group to optimise transport, and thus limit energy consumption and CO2 emissions.

During the year we continued our efforts to progressively integrate the Global Compact's ten principles into our working methods, our future plans and together with our collaboration partners.

Peter Laveson, CEO and President

Additionally, NOTE units collaborate to share experiences, good examples and suggested improvements.

Environmental audits are regularly conducted on NOTE's strategic suppliers.

Ethics

NOTE has been a member of the Global Compact, started on a UN initiative, since autumn 2011. The Global Compact states ten principles member companies undertake to comply with. These principles govern human rights, labour law, the environment and corruption. In 2014, NOTE will make its second Communication on Progress (CoP) to the UN. This reviews the work being conducted within the group internally and with customers, suppliers and other stakeholders.

In 2013, NOTE updated and strengthened its policy work and executed an employee satisfaction survey. In 2014, NOTE intends to continue developing its policy initiatives and to make a more active contribution to the progress of its surroundings on a number of our markets.

NOTE's Code of Conduct is based on the UN Global Compact and is available at www.note.eu.

A summary of the NOTE units' executed and prospective work on Global Compact principles is on the following page.

UN Global Compact principles	NOTE's approach
HUMAN RIGHTS
Principle 1 Companies are requested to support and respect the protection of international human rights in their spheres of influence; and	NOTE has been using its Code of Conduct since 2006. The company endeavours to develop business with companies that have the corresponding ethical rules on accountability.
Principle 2 ensure that their own company is not party to breaches of human rights.	NOTE has been applying its Code of Conduct since 2006.

LABOUR LAW
Principle 3 Companies are requested to maintain freedom of association and make actual recognition of the right of collective bargaining;	NOTE respects that its employees form and join labour organisations, and negotiation is collective
Principle 4 abolition of all forms of forced labour;	As part of its business principles, NOTE and its customers' and suppliers' employees should enter employment and contracts of their own free will.
Principle 5 abolition of child labour; and	NOTE does not employ children and does not collaborate with companies that use children as part of their workforce.
Principle 6 abolition of discrimination in employment and at work.	NOTE believes in a workplace where everyone has equal opportunities to work and progress.

ENVIRONMENT
Principle 7 Companies are requested to support the principle of prudence in terms of environmental risks;	NOTE's units run improvement projects in the environmental segment, and measure a series of environmental factors such as electronic scrap, energy consumption, CO2 emissions and transport. All units have environmental targets, which is monitored regularly.
Principle 8 take the initiative to promote acceptance of far-reaching environmental responsibility; and	NOTE works actively on developing policies and methodologies designed to minimise the company's negative environmental impact. Employees are encouraged to participate in this process.
Principle 9 encourage the development and dissemination of environmentally friendly technology.	NOTE takes a positive view of developing environmental technology and actively supports new manufacturing methods and components that are more environmentally friendly.
ANTI-CORRUPTION
Principle 10 Companies should counteract all forms of corruption, including blackmail and extortion.	NOTE encourages employees to resolutely counteract all forms of corruption, blackmail and extortion. Simultaneously, NOTE expects the corresponding attitudes from its customers and suppliers.

Results 2013	Targets 2014
NOTE works actively on securing compliance with NOTE's Code of Conduct. NOTE encourages customers and suppliers to join the UN Global Compact by communicating the significance of these issues. A further 18 agreements were signed with suppliers who had accepted NOTE's Code of Conduct or follow similar codes in the year. In addition, NOTE infor med new customers of its membership of the UN Global Compact and its principles and benefits. NOTE also supported UNICEF in 2013, which works actively to help children and uphold their rights.	Increase the number of suppliers and customers that accept NOTE's Code of Conduct or support UNGC's ten principles. Prepare and implement a Code of Conduct to be used in the sales organisation. Continue to actively help children and uphold their rights.
NOTE works actively to ensure compliance with its Code of Conduct. In 2013, NOTE prepared and implemented a revised human rights policy in the group subsidiaries.	Strengthen the implementation of the revised policy for human rights in all group subsidiaries.
NOTE has had employee representatives on the parent company's Board of Directors since 2009. Collective bargaining agreements are in place at most NOTE units.	Maintain existing collective bargaining agreements.
NOTE works actively to ensure compliance with its Code of Conduct. NOTE encourages customers and suppliers to join the UN Global Compact by communicating the significance of these issues. A further 18 agreements were signed with suppliers who had accepted NOTE's Code of Conduct or follow similar codes in the year. In addition, NOTE informed new customers of its participation in the UN Global Compact and its principles and benefits.	Increase the number of suppliers and customers that accept NOTE's Code of Conduct or support the UNGC.
NOTE works actively to ensure compliance with its Code of Conduct. NOTE encourages customers and suppliers to join the UN Global Compact by communicating the significance of these issues. A further 18 agreements were signed with suppliers who had accepted NOTE's Code of Conduct or follow similar codes in the year. In addition, NOTE informed new customers of its membership of the UN Global Compact and its principles and benefits.	Increase the number of suppliers and customers that accept NOTE's Code of Conduct or support the UNGC.
NOTE sees and benefits from all employees' specific competence and developmental opportunities, regardless of sex, ethnicity, sexual orientation, disability, age and social background. NOTE's units work on integrating equal opportunities and diversity in all parts of their operations. In 2013, NOTE prepared and implemented a revised human rights policy in the group subsidiaries. A group-wide employee satisfaction survey was completed for the first time in many years in 2013.	Conduct another employee satisfaction survey.
Principle 7 and 8. NOTE's units worked slightly differently on environmental issues in the year, towards individual goals. Employees receiv ed training in environmental thinking and action. A "green" power contract, with electricity is sourced from hydroelectric stations and wind turbines, was signed for all the group's Nordic units. NOTE's consumption of energy, gas, paper and water reduced, as did the share of products containing lead and waste derived from components and PCBs in produc tion. The proportion of group shipments increased, fire extinguishers were replaced with more environmentally friendly models. In addition, separate waste collection points for cardboard, plastic bottles and other waste were provided. Hazardous waste was separated, marked and correctly disposed of. NOTE has implemented a database used for identifying RoHS, Reach and conflict minerals in components. (RoHS is an EU directive that prohibits or limits use of certain heavy metals and fire retardants in electrical and electronic products on the market, Reach is an EU regulation governing chemicals and other hazardous substances.) A third party review of the environmental management system was conducted by an external party.	Principle 7 and 8. Continue to fulfill new and previously achieved targets.
NOTE conducts environmental assessments when introducing new equipment, technology and logistics solutions. The knowledge gained is shared between units in the group. An environmental perspective is considered jointly with custo mers when tailoring product manufacture. NOTE has implemented and uses a database for identifying RoHS, Reach and conflict minerals in components.	Continue progress towards even more environmental production.
NOTE has group-wide and local authorisation procedures expedient for its business. NOTE's purchasing policy stipula tes that sourcing is conducted in accordance with ethical rules, and that bribery and corruption are forbidden. In 2013, NOTE prepared and implemented an anti-corruption policy for group subsidiaries. The number of suppliers that accept NOTE's Code of Conduct increased by 18 in the year.	Strengthen the implementation of the anti-corruption policy in all group subsidiaries. Further develop internal processes and con trol functions relating to authorisation rights in all group units.

Human resources

NOTE's methodical, continuous improvement work continued in 2013. This work is conducted with the catchphrase "right from the start" and focuses on creating the prospects for greater efficiency and superior delivery precision and quality, at a competitive cost.

NOTE has a global organisation with operations in Sweden, Norway, Finland, the UK, Estonia and China. Developing the collaboration between these units is a key task, achieved through channels including a number of functional forums in segments including quality, sourcing, accounting and sales. Work on harmonising working methods, clarifying guidelines and measurement tools is also ongoing. Improvement and development work involves a lot of people in the group. Following up operational KPIs, as well as ongoing central and local improvement projects are ongoing.

As a result of reduced volumes, headcount reductions were conducted at several units through the spring. The staff reduction mainly affected temporary employees, and reduced working-hours were also utilised. Some changes were also made to management functions.

Staff turnover in the group overall was 15.5 percent, and 4.3 percent in the European units.

NOTE endeavours to secure close collaborations with training bodies, mainly in electronics. Several of NOTE's units offer opportunities for students to carry out their master thesis. To ensure quality and competence in electronics assembly, several NOTE units in Sweden and foreign countries have long-term collaborations with external partners in soldering and electronics assembly training. These training programs usually include practical work and certification of qualified electronics assemblers.

Employee of the Month

At the beginning of the year, NOTE introduced an Employee of the Month award. The winners of the award were announced throughout the year and when selecting the winner for December, NOTE also drew lots for "Winner of the Year" who was awarded a symbolic prize. The aim of the award is to encourage excellence, although the hope is also that this award will be viewed as a positive factor that binds the group together more closely.

Professional

• Flexible
• Quality focused
• Committed
• Profitable

Employee satisfaction survey

NOTE undertook a group-wide employee satisfaction survey for the first time in many years in 2013. The survey included 34 questions covering the areas of work content, organisation, management, competence development, setting standards and working climate. The results will be analysed gradually and will be used in NOTE's future planning and development work. 365 employees contributed to the survey. It was pleasing to find that 96 percent considered themselves to have meaningful and interesting work, and an equal proportion felt neutral or positive about going to work.

Employees	2013	2012
Average number of employees	847	884
Number of women	395	397
Number of men	452	487
Work attendance, %	96.1	95.0
Staff turnover, %	15.5	15.2

Trine Engelstad Team Leader Production, Norway

I joined NOTE as an Electronics Fitter five years ago, and I then went on to work as a Team Leader for three years. I'm now in a new role as a team leader Production where I ensure that our volume products are delivered on time. I'm also responsible for receiving goods, deliveries and picking materials for production.

The best thing about my job is that it's so varied. We have a very good management, which means that NOTE is a secure workplace going forward.

Mel Evans Sourcing Manager/Key Account Manager, UK

I'm responsible for the sourcing function and I also work as Key Account Manager, with responsibility for four of our accounts. In my role as sourcing manager I work alongside the sourcing team to ensure supplier quality and delivery precision, cost reductions and following up on our targets. Furthermore, I also work with quotation requests from customers.

The best thing about my job is the people I work with. Our team here in the UK is a small, close-knit and responsible group who've been working together for many years, and there's always someone who's happy to step up and help you. I also appreciate my duties and responsibilities being varied, which makes my work interesting, but also challenging sometimes.

One of the most important things that makes NOTE a good employer is the competence and support that's available right across the group whenever you need it. We're also encouraged to use our own judgment and make our own decisions.

Magnus Lundin Technology Manager, Torsby, Sweden

I'm responsible for our technology unit in Torsby, Sweden, which consists of functions that prepare new products for serial production. The technology unit also participates in the tender process as well as handling ERP and production maintenance. My job is very varied and includes a lot of administration. Preparing for investments and various projects take up a lot of my time, but they're also really stimulating!

In my nine years of working at NOTE I've probably matured quite a bit and become more thoughtful. The best thing about my job is that it's so varied and that I get to work in a growing business in a very positive atmosphere here at the Torsby plant.

It's a number of different components that make NOTE a good employer. The most important is probably the "can-do spirit" that permeates operations and the virtuous circle the company is in.

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

NOTE's parent company and group management are stationed at Danderyd, near Stockholm. NOTE has a decentralised organisational structure and each NOTE unit is responsible for sales and delivery to customers.

Peter Laveson Chief Executive Officer & President. Employed by NOTE since 2010. Born in 1973.

Education: M.Sc. (Econ.)

NOTE holdings: 10,000 shares.

Other significant assignments: Board member of Eskilstuna Jernmanufaktur AB.

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

Henrik Nygren Chief Financial Officer. Employed by NOTE since 2006. Born in 1956.

Education: M.Sc. (Eng.) industrial engineering and management.

NOTE holdings: 30,000 shares.

Other significant assignments: None.

Professional experience: Many years' experience as CFO and business controller of major listed Swedish and international industrial groups such as SSAB Svenskt Stål AB, Danaher Corporation and Snap-on Incorporated. Previous experience of business development and trade sales for companies including Retriva AB.

Robert Rosenzweig

Chief Operating Officer. Employed by NOTE since 2010. Born in 1967.

Education: Accountant, studied international economics.

NOTE holdings: 30,000 shares.

Other significant assignments: None.

Professional experience: Business Developer with Nobia AB, COO of Johnson Pump AB and other senior positions in Alfa Laval.

Five-year summary

SEK m Consolidated Income Statement	2013	2012	2011	2010	2009
Net sales	907.0	1,029.2	1,208.9	1,210.7	1,200.1
Gross profit	72.5	92.6	133.0	60.5	26.4
Operating profit	9.0	25.9	64.4	–48.2	–90.8
Profit before tax	1.2	19.1	56.3	–59.4	–97.9
Profit for the year	0.7	12.6	39.4	–62.0	–81.0
Consolidated Balance sheet
ASSETS
Non-current assets	134.5	134.8	147.8	180.9	234.6
Current assets	406.3	441.2	485.5	512.6	518.5
TOTAL ASSETS	540.8	576.0	633.3	693.5	753.1
EQUITY AND LIABILITIES
Equity	238.1	260.5	259.4	217.0	209.9
Non-current liabilities	6.7	7.0	5.5	7.1	30.5
Current liabilities	296.0	308.5	368.4	469.4	512.7
TOTAL EQUITY AND LIABILITIES	540.8	576.0	633.3	693.5	753.1
Consolidated Cash Flow Statement
Cash flow from operating activities	4.2	98.1	37.5	–25.6	42.6
Cash flow from investing activities	–6.2	–1.1	19.0	12.0	–18.7
CASH FLOW	–2.0	97.0	56.5	–13.6	23.9
Cash and cash equivalents at beginning of period	70.7	29.3	33.7	24.4	35.9
Cash flow before financing activities	–2.0	97.0	56.5	–13.6	23.9
Cash flow from financing activities	–28.2	–54.9	–61.2	25.4	–34.6
Exchange rate difference in cash and cash equivalents	0.2	–0.7	0.3	–2.5	–0.8
CASH AND CASH EQUIVALENTS AT END OF YEAR	40.7	70.7	29.3	33.7	24.4
Consolidated key figures
The share
Earnings per share, SEK	0.02	0.44	1.36	–2.55	–5.14
Cash flow per share, SEK	–0.07	3.36	1.96	–0.56	1.52
Market capitalisation
Market capitalisation at end of period	188	218	191	240	205
Margins
Operating margin, %	1.0	2.5	5.3	–4.0	–7.6
Profit margin, %	0.1	1.9	4.7	–4.9	–8.2
Returns
Return on operating capital, %	3.1	7.9	17.7	–12.1	–18.8
Return on equity, %	0.3	4.9	16.5	–29.1	–32.1
Capital structure
Operating capital (average)	291.4	328.6	364.5	398.4	483.6
Interest-bearing net debt	56.8	27.4	109.9	142.7	239.9
Equity to assets ratio, %	44.0	45.2	41.0	31.3	27.9
Net debt/equity ratio, multiple	0.2	0.1	0.4	0.7	1.1
Interest coverage ratio, multiple	1.1	2.9	5.3	–3.4	–10.0
Capital turnover rate (operating capital), multiple	3.1	3.1	3.3	3.0	2.5
Employees Sales per employee	1,071	1,164	1,287	1,211	1,228

For financial definitions, see note 29 on page 53.

Share data and shareholders

The year 2013 was NOTE's tenth on the stock market.

Share price performance

NOTE's share price fell by 14 percent in the year to a closing price of SEK 6.50 (7.55). The high in the year was SEK 7.90, on 17 January. The low of the year of SEK 5.85 was on 21 May. The stock exchange OMXSSCPI index increased by 37 percent in the year.

At the end of the year, NOTE's market capitalisation was SEK 188 (218) million. At year-end, NOTE had 2,019 (2,132) shareholders.

Turnover

6,967,142 NOTE shares were traded over the Stockholm Stock Exchange in 2013, corresponding to a rate of turnover of 24 percent. An average of 27,869 shares were traded per day.

Dividend policy

The dividend should be adapted to average profit levels over a business cycle, and for the long term, comprise 30-50 percent of profit after tax. Dividends should also be usable to adapt the capital structure.

The Board of Directors is proposing that no dividend is paid to shareholders for the financial year 2013. In the previous year, dividend was SEK 0.75 per share, corresponding to SEK 21.7 million.

	Trading

Quotation	NASDAQ OMX Stockholm
Segment	Small Cap
Sector	Industrial Goods & Services
Ticker	NOTE
ISIN code	SE0001161654
Number of shares as of 31 December 2013	28,872,600

Share capital history

Year	Transaction	Increase in no. of shares	Increase in 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 2013, by holding

		Proportion of capital/votes,
Name	No. of shares	%
Creades AB	4,613,827	16.0
Banque Carnegie Luxembourg S.A.	3,105,096	10.8
Garden Growth Capital LLC	2,315,000	8.0
Nordnet Pensionsförsäkring AB	1,918,751	6.6
Avanza Pension	1,648,598	5.7
Kjell-Åke Andersson with family	1,394,855	4.8
Friends Provident International	1,100,000	3.8
Johan Hagberg	949,167	3.3
Robur Försäkring	545,073	1.9
Skandinaviska Enskilda Banken S.A	409,441	1.4
Total	17,999,808	62.3

Division by size, holdings by shareholder as of 31 December 2013

Size of holding	No. of shareholders	No. of shares	Proportion of capital/ votes, %
1-500	789	155,990	0.5
501-2,000	582	662,095	2.3
2,001-5,000	278	995,848	3.4
5,001-20,000	266	2,619,341	9.1
20,001-50,000	51	1,626,515	5.6
50,001-500,000	44	5,693,938	19.7
500,001-5,000,000	9	17,118,873	59.4
Total	2,019	28,872,600	100.0

Formal Annual Accounts

Corporate Governance Report

Introduction

The regulatory structure applied for governing and controlling NOTE is primarily the Swedish Companies Act, applicable regulations for listed companies, the Swedish Code of Corporate Governance (the Code) as well as internal guidelines and policies.

Non-compliance with the Code

NOTE complies with the Code with the exception of the composition of its Audit Committee. This instance of non-compliance is reported and reasoned in the Corporate Governance Report in the Audit Committee section.

Articles of Association

The Articles of Association are approved by the Annual General Meeting (AGM) and include a number of mandatory duties of a more fundamental nature in accordance with applicable legislation. The Articles of Association state items including the Board of Directors consisting of a minimum of three and a maximum of ten ordinary members.

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.

The Board members are elected annually at the AGM for the period until the end of the following AGM. Resolutions on amending the Articles of Association are taken at Annual or Extraordinary General Meetings. Invitations to shareholders' meetings that are to deal with amendments of the Articles of Association should be issued at the earliest six and the latest four weeks prior to such meeting. The Articles of Association also stipulate items including the company's registered office, operations, the amount of share capital, the number of shares and how the AGM is convened.

Shareholders

At the end of 2013, NOTE had two shareholders representing more than 10 percent of the shares of the company each. Creades AB represented 16.0 percent and Banque Carnegie Luxembourg S.A. represented 10.8 percent. For more information on the share and shareholders, see The NOTE share on pages 22–23.

• 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.

Shareholders' meetings

The Shareholders' Meeting 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 correctly, are entitled to 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 Meeting 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 meeting are published after the Meeting in a press release and a report from the Meeting is published on the website www.note.eu. NOTE's AGM will be held in Danderyd or Stockholm, Sweden.

The Annual General Meeting 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.

Annual General Meeting 2013

NOTE's AGM was held on 22 April 2013 at Spårvagnshallarna in Stockholm, Sweden. Shareholders representing a total of 20.3 percent of the capital and votes attended the Meeting. The Meeting resolved on matters including re-electing Board members and approving fees in accordance with the Nomination Committee's proposal. The Meeting also resolved to pay dividends of SEK 0.75 per share to shareholders for the financial year 2012 and to authorise the Board of Directors to decide on purchases and transfers of treasury shares.

Nomination Committee members for the AGM 2014

		Share of capital/votes, %
Committee member	30 Sep. 2013	31 Dec. 2013
Kjell-Åke Andersson, personal holdings	4.8	4.8
Bruce Grant, Garden Growth Capital LLC	8.0	8.0
Daniel Nyhrén, Creades AB	16.0	16.0
Peter Zonabend, Banque Carnegie Luxembourg S.A.	10.8	10.8

Nomination Committee

The AGM resolves on how the Nomination Committee is appointed. The AGM 2013 resolved that the Nomination Committee for the forthcoming AGM shall be formed by the four largest shareholders that wish to participate, each appointing a representative at least six months prior to 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 remuneration for Committee work.
• Where applicable, election and remuneration of the 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 2014. No special remuneration was paid to the members of the Nomination Committee.

Auditors

The AGM appoints the Auditors. 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 2012 elected Öhrlings PricewaterhouseCoopers AB as audit firm, with Magnus Brändström as Auditor in Charge until the AGM 2015.

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, determines 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 remuneration 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 in accordance with the Swedish Companies Act, applicable regulations for listed companies, including the Code and other laws and ordinances. 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 five members elected by the Annual General Meeting. 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 sales, and strategic development. The AGM 2013 re-elected Kjell-Åke Andersson, Stefan Charette, Bruce Grant, Stefan Johansson and Henry Klotz 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 2013

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 on overall issues such as the company's strategy, marketing and sales, financing, budget and long-term operational planning.

The Board held seven 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 main duty of the Audit Committee is to consult on matters for the Board of Directors' decision.

The Audit Committee is not authorised to reach decisions indepen- dently. Reporting to the Board on issues considered at Audit Committee meetings is either in writing or orally at the fol- lowing Board meeting.

In the financial year, the Audit Committee members were Stefan Charette and Stefan Johansson. Accordingly, NOTE departs from the Code in terms of the Board of Directors creating an Audit Committee that should consist of at least three Board members. The Board of Directors judges that two members of the Audit Committee are sufficient considering the size of the company and its Board of Directors.

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.
• Follow up on external Auditors' reviews and appraise 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 Audit Committee has a close and regular collaboration with the group's corporate finance function regarding internal and external reporting of financial information. There is also a collaboration developed on matters of internal control, election and appraisal of auditing principles and models.

In the financial year 2013, the Audit Committee monitored compliance with

Board of Directors 2013

the adopted guidelines and 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.

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 measures during the year.
• Following up on the internal audit function's review in the year. The focus has been on valuations of inventories, accounts receivable—trade and goodwill, and auditing foreign subsidiaries.
• Following up on the company's financing situation and discussions relating to the liquidity.

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 consisted of the whole Board in 2013.

The duties of the Remuneration Committee are to:

• Consult on matters regarding remuneration principles, remuneration and other employment terms for group management.
• Monitor and evaluate ongoing programs and programs concluded in the year for performance-related pay for group management, subsidiary Presidents and other key staff.

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 and monitored compliance with adopted guidelines.

The following main issues were considered:

• Evaluation and approval of remuneration structures for group management.
• Discussion and setting of performancerelated pay for group management, subsidiary Presidents and other key staff in accordance with the program based on NOTE's profit performance, which ran in 2013.

After an evaluation, the Remuneration Committee concluded that:

• NOTE is following the guidelines for remunerating senior management that the AGM 2013 resolved on.
• Applicable remuneration structures and levels are reasonable against the background of the company's operations.
• The profitability-based, performancerelated remuneration program which ran in 2013 did not result in any remuneration to group management.

Non-affiliated

		To company and	To company's
Board member	Position	management	major shareholders
Stefan Charette	Chairman	Yes	No*
Kjell-Åke Andersson	Member	Yes	Yes
Bruce Grant	Member	Yes	Yes
Stefan Johansson	Member	Yes	Yes
Henry Klotz	Member	Yes	Yes
Bert Nordberg (resigned 22 April 2013)	Member	Yes	Yes
Christoffer Skogh	Employee representative, member	Yes	Yes
Andreas Ollén	Employee representative, deputy	Yes	Yes

*CEO of Creades AB, NOTE's biggest shareholder.

Guidelines for remuneration and other benefits for senior management

For information on these guidelines, refer to the formal Annual Accounts on page 34. For information on remuneration and other benefits, see note 7, Employees, personnel expenses and remuneration to senior management, on page 44.

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. The CEO reports to the Board of Directors, informing them on how operations are progressing based on the decisions they have taken. Written instructions define the division of responsibility between the Board of Directors and the CEO. For more information on NOTE's CEO, see Operations on page 20.

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 overall 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 20.

Governance of subsidiaries

Subsidiaries' operations are monitored monthly on the basis of a series of operational targets, financial targets and key figures.

Internal controls and risk management Control environment

The division of roles and responsibilities 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 work to maintain effective internal controls has been delegated to, and is managed primarily by, the CEO and the group's corporate finance function. NOTE also works in close collaboration with its auditors.

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 corporate finance 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 operational and financial 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 14 and note 23, Financial risks and finance policy on page 51.

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 has been enhanced in recent years.

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 corporate finance function.

Attendance and remuneration to the Board of Directors
	Board	Remunera tion Com	Audit Com		Committee
Position	meetings	mittee	mittee	fees, SEK	fees, SEK
Chairman	7/7	1/1	2/2		–
Member	7/7	1/1	–		–
Member	3/7	1/1	–		–
Member	7/7	1/1	2/2		60,000
Member	6/7	1/1	–		–
Member	2/3	1/1	–	–	–
Employee representative, member	7/7	1/1	–	–	–
Employee representative, deputy	7/7	1/1	–	–	–
				Attendance statistics	Directors' 300,000 100,000 100,000 100,000 100,000

Fees are for the mandate term May 2013 to April 2014, resolved by the AGM 2013.

NOTE ANNUAL REPORT 2013 29

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*: 355,097 shares.

Other significant assignments: CEO of Creades AB. Chairman of the Board of Athanase Capital Partners AB and Concentric AB. Board member of Creades AB, Haldex AB, Lindab International AB and Transcom S.A.

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

Kjell-Åke Andersson

Board member, elected in 2010. Born in 1946.

Education: M.Sc. (Eng.)

NOTE holdings*: 1,385,040 shares.

Other significant assignments: Board work and consulting in corporate management. Chairman of the Board of Cervitrol AB, Domitech AB and MedicPen AB. Board member of Mekatronik Konsult i Lund AB and Softhouse Nordic 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: Ph.D. and B.Sc. (Finance)

NOTE holdings*: 2,315,000 shares.

Other significant assignments: Executive Chairman and principal owner of Garden Growth Capital LLC and Applied Value LLC. Chairman of the Board of Human Care HC AB (publ).Board member of Robust 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 Investment AB Kinnevik, Korsnäs AB, Metro International S.A., Stille AB, Transcom WorldWide S.A. and Tele2 AB (Chairman).

*Including related parties' holdings.

Stefan Johansson

Board member, elected in 2011. Born in 1958.

Education: B.Sc. (Finance)

NOTE holdings: 10,000 shares.

Other significant assignments: CFO of ÅF AB (publ).

Professional experience: Former CFO and COO of Haldex AB. CFO of ABB Stal AB, Duni AB, Linjebuss AB, Sanmina Corporation AB and Segerström & Svensson AB. Broad experience of strategic and operational work in a number of sectors, primarily manufacturing. Many years' experience of corporate development and change work.

Henry Klotz

Board member, elected in 2010. Born in 1944.

Education: Engineering and Finance.

NOTE holdings: 0 shares.

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

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

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: Key Account Manager. Previously held positions in supplier development, 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.

Auditors

Öhrlings PricewaterhouseCoopers AB (PwC) was elected Auditor of NOTE AB by the AGM 2012. The next planned election of Auditors will be at the AGM 2015.

Magnus Brändström

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

Report of the Directors

OPERATIONS—GENERAL

NOTE is one of the leading manufacturing and logistics partners for electronics production in northern Europe. NOTE's offering covers complete product lifecycles, from design to after-sales.

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

OPERATIONS IN 2013

On the basis of a clear strategic agenda, NOTE has continued working methodically to reinforce its customer offering as a manufacturing and logistics partner of electronics-based products, from design to after-sales. The aim is to increase market share and ensure profitable growth. NOTE puts a special focus on new product introductions and maintaining high quality and delivery precision. These factors are crucial to customers' total cost, and to NOTE's competitiveness.

Largely, NOTE's business is based on long-term partnerships and customer relationships. For some time now, NOTE's main mission has been to extend its customer base, and thus increase sales and capacity utilisation at its plants. In 2013, NOTE reported sales of just over SEK 50 million from the new business relationships established in 2012. Most of these customers are SMEs that NOTE has provided industrialisation services for (service sales, prototypes and pilot batches). Some customer relations don't go any further, while others gradually move on to batch production and increased volumes. NOTE maintained a high tempo of building new business relationships in 2013.

The market remained weak in several of NOTE's domestic markets. However, NOTE's market initiatives started to payoff during the autumn. After a protracted period of fading volumes, sales increased by just over 6 percent in the fourth quarter. The sales increase was mainly due to relatively new customers and improved volumes from project-oriented business. During the year, NOTE extended and

strengthened its manufacturing and logistics partnerships with Powernet of Finland and Bravida Fire & Security of Sweden. NOTE also secured two attractive new business deals on advanced communications products, one project in Sweden with high potential, and one for its unit in Estonia.

NOTE works continuously to reduce its cost base in the year. In full-year terms, costs were down 4 percent year on year. However, operating profit was low in the first half-year because of lower volumes.

NOTE has been informing the market about one of its customers, who has been in financial difficulties, since the first quarter 2012. NOTE maintained a very close dialogue on deliveries, payments, risks and opportunities. Against the background of this customer's deteriorating financial position, in the fourth quarter 2012, NOTE made a provision for doubtful debt of SEK 12.6 million before tax. In 2013, the parent company of this customer filed for bankruptcy, and it now has a new owner. Despite continued close dialogue involving several parties on a reconstruction process, no solution for resuming production was achieved. Accordingly, a provision for the remaining risk exposure to this customer was made in the third quarter. The provision amounts to a total of SEK 21.0 million, of which SEK 8.4 million was charged to operating profit in the third quarter 2013.

NOTE focuses on measures to rationalise working capital utilisation. However, fourth quarter sales growth, combined with investments in manufacturing rationalisations and quality projects, meant that cash flow (after investments) was not in line with previous year.

SALES AND RESULTS OF OPERATIONS Group

Sales 2013

Continued poor demand on several of NOTE's domestic markets, especially Sweden, was apparent in the year. Sales in Finland and Norway were more stable. Uncertainty on several final markets and

persistent caution by European customers often caused delays to customer projects and stock redimensioning by customers. As a consequence, volumes on several ongoing customer assignments reduced, which had a negative effect on sales. Sales were SEK 907.0 (1,029.2) million in the year, a decline of 12 percent. Sales were lower than planned. No deliveries were made to the customer with the provision for doubtful debt—approximately 5 percent of the sales reduction related to financial problems at the customer level. Sales to Swedish and UK customers with projectoriented sales also fell significantly, mainly in the first half of the year.

NOTE sells to a large customer base, essentially active in the engineering and communication industries in the Nordics and UK. NOTE endeavours to secure long-term customer relations, and its 15 largest customers in sales terms represented 57 (57) percent of the group's sales. As in the previous year, no single customer (group) represented more than about 9 percent of total sales.

Direct Sales from Industrial Plants in Estonia and China also continued to grow. These transactions, essentially to customers in Europe, continued to perform positively, representing 24 (16) percent of total sales in the year.

Results of operations 2013

The fairly extensive restructuring program completed at year-end 2010 has been fundamental to NOTE's improved financial position. Electronics production was then concentrated on fewer units in Sweden and internationally. Unprofitable operations were sold off or closed down. Central costs adapted to the prevailing market conditions and parts of electronics production were relocated to other NOTE units. In this way, the group's capacity utilisation was increased simultaneous with costs being reduced.

In order to create the right conditions to further enhance its customer offering, NOTE is conducting continuous and methodical improvement work at all its units. This work is conducted locally

at each unit and through a number of group-wide projects. Mainly as a result of this, costs reduced by 4 percent. But decreased production and sales volumes resulted in the gross margin contracting by 1.0 percentage points to 8.0 (9.0) percent. The provision for doubtful debt in the third quarter decreased gross margin by 0.9 percentage points.

Despite strengthening of the sales organisation, sales and administration overheads reduced by 2 percent, and were 7,1 (6.3) percent of sales.

Other operating expenses/income, primarily consisting of revaluations of foreign currency assets and liabilities, were SEK 0.4 (-1.7) million.

Mainly as a result of lower manufacturing volumes, operating profit decreased to SEK 9.0 (26.0) million, corresponding to an operating margin of 1.0 (2.5) percent. Adjusted for the thirdquarter provision for bad debt, operating profit was SEK 17.4 million and the operating margin was 1.9 percent.

Net interest income/expense was SEK -7.8 (-6.9) million. Profit after financial items was SEK 1.2 (19.1) million, corresponding to a profit margin of 0.1 (1.9) percent.

Profit after tax was SEK 0.7 (12.6) million, corresponding to SEK 0.02 (0.44) per share. Adjusted for the provision for bad debt, earnings per share were SEK 0.25 after standard rate tax. The tax expense for the year corresponded to 45 (34) percent of profit before tax.

Parent company

Parent company NOTE AB (publ) is primarily focused on the management, co-ordination and development of the group. In the year, revenue was SEK 36.2 (36.7) million, and mainly related to intra-group services. The profit after tax was SEK 9.3 (18.7) million.

As part of the restructuring program conducted in 2010, NOTE sold 90 percent of the former CAD operation and its 50 percent holding in Polish company NOTEFideltronik. The remaining 10 percent holding in the CAD operation was

sold in the second quarter. Coincident with this, NOTE received full payment for the previously outstanding advances and interest-bearing receivables, which amounted to a total of approximately SEK 5 million at year-end 2012.

FINANCIAL POSITION, CASH FLOW AND INVESTMENTS Cash flow

Competing successfully in the high mix/ low volume market segment sets high standards on flexible production, good supply of materials and effective logistics solutions. Accordingly, NOTE faces a major challenge in continuously improving its working methods and internal processes in these segments. This challenge is especially apparent in rapid cyclical demand upturns and downturns, and relates mainly to the complexity of materials supply and changing leadtimes of electronic components.

Although somewhat longer leadtimes for electronic components were apparent, as in the previous year, the global market for electronic components was fairly stable, and with good access to components. This benefitted NOTE's materials planning and logistics. Against this, the final market for several of NOTE's customers remained poor, translating into continued caution by several customers in terms of making longer orders and forecasts. Overall, this meant fairly inconsistent utilisation of the group's production units with shorter batches and re-planning of materials sourcing and production as a result. In addition, starting up new customer assignments requires initial working capital, mainly stock.

As a result of focused initiatives and the introduction of new logistics solutions, stock reduced by some 5 percent year on year. Adjusted for the write-down for bad debt in the third quarter, stock remained at the same level compared to the previous year-end despite the sales increase.

Mainly as a result of volume growth in the final quarter of the year, accounts receivable—trade were up 7 percent

at the end of the year. Accordingly, the number of days of credit was basically unchanged compared to the previous year-end.

Accounts payable—trade, which mainly relate to sourced electronic components and other production materials, were down 8 percent on the previous year-end. NOTE is continuing its initiative to extend the number of days of credit to suppliers and concentrate sourcing on fewer, quality-assured suppliers. The reduction in accounts payable—trade was essentially linked to the stock reduction in the fourth quarter.

Cash flow (after investments) was SEK -2.0 (97.0) million, corresponding to SEK -0.07 (3.36) per share.

Equity to assets ratio

The equity to assets ratio at the end of the period was 44.0 (45.2) percent. The dividend decided and paid in the second quarter, of SEK 0.75 per share, reduced the equity to assets ratio at the end of the year by some 4 percentage points.

Liquidity

NOTE is maintaining a sharp focus on measures to further improve the group's liquidity and cash flow.

The group's available cash and cash equivalents, including un-utilised overdraft facilities, were SEK 98.3 (128.0) million at the end of the year. Factored accounts receivable—trade were some SEK 140 (144) million.

Investments

Capital expenditure on property, plant and equipment amounted to SEK 10.3 (8.1) million, corresponding to 1.1 (0.8) percent of sales. Capital expenditure primarily consisted of rationalisation and quality improvement projects in electronics manufacture.

Depreciation and amortisation according to plan was SEK 11.2 (16.0) million.

RESEARCH AND DEVELOPMENT ACTIVITIES

As a manufacturing partner, NOTE is closely involved in its customers' development processes through its operations, including contributing to the industrialisation phase and guiding and developing manufacturing processes for its customers. This work is continuous and not reported separately in the accounts.

NOTE worked on developing a groupwide system for operational support in the year. The costs, which satisfy the critera for capitalised expenditure, have been capitalised in the Balance Sheet.

THE NOTE SHARE

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 were two shareholders with a shareholding of more than 10 percent, Creades AB with 16.0 (16.3) percent of the votes and Banque Carnegie Luxembourg S.A. with 10.8 (10.8) percent of the votes.

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

For more information on the share and shareholders, see the NOTE share on pages 22–23.

HUMAN RESOURCES

The average number of full-time employees was 847 (884) in the year, 395 (397) of them being women and 452 (487) men. At year-end, NOTE had 851 (898) employees.

Work attendance in the group was 96.1 percent (95.0 percent) of regular working hours and staff turnover was 15.5 (15.2) percent.

For more information on employees, see Operations on pages 18–19.

GUIDELINES FOR REMUNERATING SENIOR MANAGERS

Senior managers means the members of NOTE's Group management.

For 2014, the following unchanged 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 targets, subject to a maximum of 100 percent of basic salary. Pensionable age is 65. NOTE offers benefits similar to the ITP scheme (supplementary pensions for salaried employees). The dismissal pay and severance pay of 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 2013 was decided in accordance with the adopted guidelines formulated by the Board of Directors, which were then approved by the AGM 2013. For more information on remuneration, see note 7, Employees, personnel expenses and remuneration to senior managers, on page 44.

ENVIRONMENT

Reporting obligation and certification The group conducts business in one Swedish subsidiary, which holds permits compliant with the Swedish Ordinance on Environmentally Hazardous Activities & Health (reference SFS 1998:899). Two facilities are subject to permits and one Swedish facility is partially subject to a permit.

All NOTE's production units 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 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 where the company uses what are known as SVHC materials.

For more information on environmental matters, see Operations on page 15-17.

SIGNIFICANT RISKS OF OPERATIONS Operational risks

NOTE is one of the leading manufacturing and logistics partners for electronics production in northern Europe. It has especially strong market positioning in the high mix/low volume market segment, i.e. for products in small to mediumsized batches that require high technology competence and flexibility.

NOTE produces PCBAs, sub-assemblies and box build products. NOTE's offering covers complete product lifecycles, from design to after-sales. NOTE's role includes it serving as a collaboration partner to customers, but not a product owner.

NOTE's Nearsourcing business model, which is designed to increase sales growth combined with reduced cost of overheads and investments in high-cost countries, is a way to reduce the risks of operations.

For more information on operational risks, see Operations on page 14.

Financial risks

Through its operations, the group is exposed to different forms of financial risks, such as borrowing and interest risk, currency risk, as well as liquidity and credit risks. Essentially, the group is financed 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.

A significant portion of the group's invoicing is denominated in SEK. Currency risk within the group mainly

relates to purchasing of production materials, as this is largely effected in foreign currencies. Purchasing in foreign currency is largely hedged, partly through binding agreements, where the customer bears the currency risk, and partly through cash flow hedges. The hedged currencies are USD and EUR. For more information on financial risks, see operations on page 14 and note 23 Financial risks and finance policy, on page 51.

POST-BALANCE SHEET EVENTS

There were 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.

NOTE's Nearsourcing business model is strong, and tailored for the high mix/ low volume market segment. It builds on developing business in NOTE's Nearsourcing centres in Sweden, Norway, Finland and the UK in close collaboration with customers. Usually, labour-intensive serial production is located at Industrial Plants in Estonia and China.

The sales growth in the fourth quarter indicates that NOTE is heading in the right direction. But NOTE also views forthcoming market progress and customers' future plans with great humility. The focus for the future is to retain and develop the working method and approach we have introduced to win new business, continue our rationalisation work and be highly successful in the utilisation of our working capital.

PROPOSED APPROPRIATION OF PROFITS

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

Total	96,449,044
Carried forward	96,449,044
Distributed to shareholders	–
Total	96,449,044
Profit for the year	9,293,663
Brought forward	87,155,381

Consolidated Income Statement

SEK 000	NOTE	2013	2012
Net revenue	2, 3	906,975	1,029,241
Cost of goods sold and services		–834,450	–936,631
Gross profit		72,525	92,610
Selling expenses		–34,505	–33,653
Administrative expenses		–29,443	–31,309
Other operating revenue	4	7,020	11,764
Other operating expenses	5	–6,585	–13,463
Operating profit	3, 6, 7, 8, 25	9,012	25,949
Financial income		3,374	3,290
Financial expenses		–11,202	–10,154
Net financial income/expense	9	–7,828	–6,864
Profit before tax		1,184	19,085
Tax	10	–534	–6,465
Profit for the year		650	12,620
Basic and diluted earnings per share, SEK	16	0.02	0.44

Consolidated Statement of Other Comprehensive Income

SEK 000	2013	2012
Profit for the year	650	12,620
Other comprehensive income:
Exchange rate differences	–1,242	–3,699
Cash flow hedges	–	131
Tax on cash flow hedges and exchange rate difference	–113	670
Total other comprehensive income, net after tax	–1,355	–2,898
Total comprehensive income for the year	–705	9,722

Consolidated Balance Sheet

SEK 000	NOTE	31 Dec 2013	31 Dec 2012
Assets
Intangible assets	11	76,247	72,109
Property, plant and equipment	3, 12	44,338	45,769
Long-term receivables	13	379	1,222
Deferred tax assets	10	13,583	15,736
Total non-current assets		134,547	134,836
Inventories	3, 14	151,447	159,522
Accounts receivable—trade	23, 24	199,796	186,952
Tax receivables		5,445	4,871
Other receivables	13, 24	2,189	8,626
Prepaid expenses and accrued income	15	6,737	10,502
Cash and cash equivalents	24, 27	40,731	70,723
Total current assets		406,345	441,196
TOTAL ASSETS		540,892	576,032
Equity	17
Share capital		14,436	14,436
Other paid-up capital		217,862	217,862
Reserves		–5,779	–4,424
Retained profit		11,617	32,621
Equity		238,136	260,495
Liabilities
Long-term interest-bearing liabilities	18, 23, 24	4,265	3,056
Pension commitments	19	–	–
Deferred tax liabilities	10	2,432	3,945
Total non-current liabilities		6,697	7,001
Current interest-bearing liabilities	18, 23, 24	93,272	98,285
Accounts payable—trade	23, 24	133,354	144,672
Tax liabilities		1,595	2,786
Other liabilities	21	21,148	19,630
Accrued expenses and deferred income	22	46,690	43,163
Other provisions	20	–	–
Total current liabilities		296,059	308,536
TOTAL EQUITY AND LIABILITIES		540,892	576,032

For information on the group's pledged assets and contingent liabilities see note 26 on page 52.

Consolidated Statement of Changes in Equity

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit	Total equity
Opening equity, 1 Jan 2012	14,436	217,862	–1,526	28,663	259,435
Comprehensive income
Profit for the year	–	–	–	12,620	12,620
Other comprehensive income
Exchange rate differences	–	–	–3,699	–	–3,699
Cash flow hedges	–	–	131	–	131
Tax on cash flow hedges and exchange rate difference	–	–	670	–	670
Total comprehensive income	–	–	2,898	12,620	9,722
Dividend	–	–	–	–8,662	–8,662
Closing equity, 31 Dec 2012	14,436	217,862	–4,424	32,621	260,495

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit	Total equity
Opening equity, 1 Jan 2013	14,436	217,862	–4,424	32,621	260,495
Comprehensive income
Profit for the year	–	–	–	650	650
Other comprehensive income
Exchange rate differences	–	–	–1,242	–	–1,242
Cash flow hedges	–	–	–	–	–
Tax on cash flow hedges and exchange rate difference	–	–	–113	–	–113
Total comprehensive income	–	–	1,355	650	–705
Dividend	–	–	–	–21,654	–21,654
Closing equity, 31 Dec 2013	14,436	217,862	–5,779	11,617	238,136

Consolidated Cash Flow Statement

SEK 000	NOTE	2013	2012
	27
Operating activities
Profit before tax		1,184	19,085
Reversed depreciation and amortisation		11,226	16,017
Other non-cash items		2,665	19,632
Tax paid		–3,400	–4,592
		11,675	50,142
Change in working capital
Increase (–)/decrease (+) in inventories		4,246	35,999
Increase (–)/decrease (+) in trade receivables		–3,696	25,806
Increase (+)/decrease (–) in trade liabilities		–8,016	–13,805
		–7,466	48,000
Cash flow from operating activities		4,209	98,142
Investing activities
Purchase of property, plant and equipment		–6,152	–5,173
Sale of property, plant and equipment		900	1,250
Purchase of intangible assets		–4,163	–75
Sale of financial assets		3,202	2,880
Cash flow from investing activities		–6,213	–1,118
Financing activities
Borrowings		2,843	–
Amortisation of loans		–9,354	–46,224
Dividends paid		–21,654	–8,662
Cash flow from financing activities		–28,165	–54,886
Cash flow for the year		–30,169	42,138
Cash and cash equivalents
At beginning of period		70,723	29,297
Cash flow before financing activities		–2,004	97,024
Cash flow from financing activities		–28,165	–54,886
Exchange rate difference in cash and cash equivalents		177	–712
Cash and cash equivalents at end of period		40,731	70,723

Notes on the consolidated financial statements

Note 1 Critical accounting principles

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 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 restatements of following years' financial statements are reviewed in more detail in note 30.

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

The annual accounts and consolidated accounts were approved by the Board for issuance on 16 February 2014. The Consolidated Income Statement and Balance Sheet will be subject to adoption at the AGM (Annual General Meeting) on 25 April 2014.

Amended accounting principles

None of the IFRS or IFRIC interpretation statements that are mandatory for the first time for the financial year that began on 1 January 2013 or later are expected to have any material impact on the group.

New standards, amendments and interpretations of existing standards that have not been adopted in advance by the group

A number of new standards and interpretation statements come into effect from financial years that begin after 1 January 2013 and have not been adopted in the preparation of this financial report. None of the above are expected to have any material impact on the consolidated accounts apart from the following:

IFRS 10 "Consolidated Financial Statements" builds on existing principles because it identifies control as the decisive factor to determine whether a company should be included in the consolidated accounts. The standard offers further guidance on determination of control when this is hard to judge. The group intends to apply IFRS 10 for the financial year that begins on 1 January 2014 and has not yet evaluated the full effect on its financial statements.

IFRS 12 "Disclosures of Interests in Other Entities" covers disclosure requirements for subsidiaries, joint arrangements, associated companies and non-consolidated structured entities. The group intends to apply IFRS 12 for the financial year that begins on 1 January 2014 and has not yet evaluated the full effect on the financial statements.

IFRS 9, "Financial Instruments" deals with the presentation, measurement and recognition of financial liabilities and assets. IFRS 9 was issued in November 2009 for financial assets, and in October 2010 for financial liabilities, and replaces those parts of IAS 39 that relate to the presentation and measurement of financial instruments. IFRS 9 states that financial assets should be classified in two different categories; measurement at fair value or measurement at amortised cost. This classification is determined on first-time recognition based on the company's business model and characteristic qualities of the contracted cash flows. For financial liabilities, there are no major changes compared to IAS 39. The largest change relates to liabilities, which are identified at fair value. For these, the change in fair value that relates to their own credit risk should be recognised in other comprehensive income instead of profit or loss, providing this does not cause an accounting mismatch. The group has not yet evaluated its effects. The group will be evaluating the effects of the remaining phases of IFRS 9 when they are concluded by IASB.

IFRIC 21 "Levies" is an interpretation of IAS 37 "Provisions, Contingent Liabilities and Contingent Assets." IAS 37 clarifies the criteria for recognizing a liability, of which one criterion us the company having an existing obligation that has arisen because of a past event (the obligating event). The interpretation clarifies that the obligating event that causes an obligation to recognize a liability to pay a levy is the activity that is defined in the relevant legislation as being the event that causes the obligation to pay the levy. The group intends to adopt IFRIC 21 for the financial year that begins 1 January 2014 and has not yet evaluated its full effect on the financial statements.

No other IFRS or IFRIC interpretation statements that have not come into effect are expected to exert any material impact on the group.

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 the reporting date.

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 13 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. For acquisitions from 2010 onwards, transaction costs are recognised in the Income Statement.

Transactions to be eliminated on consolidation

Receivables from and liabilities to group companies, revenues or expenses and unrealised gains or losses arising from group transactions, are fully eliminated when preparing the consolidated financial statements.

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 on translation 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 in 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 been charged to 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 charged with 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

Financial instruments recognised in the Balance Sheet include cash and cash equivalents, accounts receivable—trade, derivatives and loans receivable on the assets side. Accounts payable—trade, derivatives 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 obligation 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. Purchases and sales of financial assets are recognised on the transaction date, which is the date the company undertakes to purchase 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 asset and can be measured reliably. The asset's impairment loss is recognised in the Income Statement.

Subsequent recognition then 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 non-derivative financial assets 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 including transaction costs, and then at amortised cost by applying the effective interest method, less potential provisioning 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.

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 including transaction costs, 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 receivable 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.

Regarding NOTE's factoring financing in Estonia, 90 percent of the risk in accounts receivable—trade has been transferred to the creditor. This financing is also reported as factoring, in accordance with applicable regulations.

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 are 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 principles for impairment losses are reported below.

Property, plant and equipment that comprise components of differing useful lives are treated as separate components of property, plant and equipment.

The carrying amount of property, plant and equipment is de-recognised from the Balance Sheet on disposal or sale, or when no future economic rewards are expected from using

or disposing of/selling the asset. Profits or losses arising upon disposal or sale 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 operating revenue/expenses.

Additional expenditure

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 retired 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
Leasehold improvements—permanent equipment, servicing facilities etc. in buildings	5 years
Leasehold improvements—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 a business combination and the fair value of acquired assets, liabilities taken over and contingent liabilities.

Goodwill is recognised at cost less potential accumulated impairment losses. Goodwill from a business combination is allocated to the groups of cash generating units that are expected to benefit from the synergies of the business combination. NOTE allocates goodwill to the Nearsourcing and Industrial Plants business segments. 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 indefinite. 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 work in progress includes a reasonable proportion of indirect expenses based on normal capacity utilisation.

The cost of finished and semi-finished goods produced by the company includes direct production expenses and a reasonable proportion of indirect production expenses.

Valuations consider normal capacity utilisation. Inventories are recognised net of deductions for individually judged risk of obsolescence.

Impairment

With the exception of inventories and deferred tax assets, the carrying amounts of the group's assets are subject to impairment tests at each reporting date. If there is such indication, the asset's recoverable value is calculated. Assets exempted by the above are subject to impairment tests 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 charged 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

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

A defined contribution pension plan is a pension plan by which NOTE pays fixed charges to a separate legal entity. NOTE does not have any legal or informal obligation to pay further contributions if this legal entity does not have sufficient assets to pay all benefits to employees associated with employees' service during current or previous periods.

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.

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 an obligation, and it is likely that an outflow of economic resources will be necessary to fulfil the obligation and the amount can be reliably measured. Provisions are measured at the present value of the amounts expected to be required to fulfil the obligation.

Restructuring program and other non-recurring expenses

A restructuring program provision is recognised when the group has determined an executable and formal restructuring program plan, and the restructuring program 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 to be paid or received for the current year, applying the tax rates enacted or substantively enacted as of the reporting date, 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 recognition 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 as of the reporting date.

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 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 largely manufacturing units in Estonia and China. Other units consist of business-support, group-wide operations.

	Nearsourcing Centres		Industrial Plants		Other units and eliminations		Total
	2013	2012	2013	2012	2013	2012	2013	2012
REVENUES
External sales	692,887	859,814	214,088	169,427	–	–	906,975	1,029,241
Internal sales	5,828	4,467	152,622	227,667	–158,450	–232,134	–	–
Revenues	698,715	864,281	366,710	397,094	–158,450	–232,134	906,975	1,029,241
OPERATING PROFIT
Operating profit	16,067	35,833	–5,051	–9,061	–2,004	–823	9,012	25,949
Operating profit	16,067	35,833	–5,051	–9 ,061	–2,004	–823	9,012	25,949
Financial income and expenses—net							–7,828	–6,864
Profit before tax							1,184	19,085
SIGNIFICANT ASSETS BY SEGMENT
Property, plant and equipment	24,686	25,072	19,652	20,697	–	–	44,338	45,769
Inventories	78,854	83,730	72,593	75,792	–	–	151,447	159,522
Total assets	401,560	420,889	175,596	187,665	–36,264	–32,522	540,892	576,032
OTHER INFORMATION
Investments in property, plant and equipment	5,401	3,429	2,922	3,046	–	–	8,323	6,475
Depreciation and amortisation	–5,787	–8,919	–5,439	–7,084	–	–14	–11,226	–16,017
Other non-cash items (excl. depreciation and amortisation)	–1,699	–2,906	5,900	20,845	–1,536	1,693	2,665	19,632
Average number of employees	368	385	464	484	15	15	847	884

NOTE's registered office is in Sweden. Revenues from external customers in Sweden were SEK 428.8 (486.2) million, and from other countries SEK 478.2 (543.0) million. Non-current assets in Sweden (excluding financial) were SEK 55.1 (50.6) million, in Estonia SEK 16.2 (15.0) million, the UK SEK 4.0 (4.3) million, Norway SEK 5.7 (6.1) million and in other countries SEK 35.7 (37.4) million as of the reporting date. Deferred tax assets in Sweden were SEK 3.2 (1.6) million, in Norway SEK 5.2 (6.5) million, the UK SEK 4.2 (5.8) million and other countries SEK 1.0 (1.8) million as of the reporting date.

Note 4 Other operating revenue

	2013	2012
Exchange gains on trade receivables/liabilities	5,445	10,661
Other	1,575	1,103
	7,020	11,764

Note 6 Operating expenses by type

	2013	2012
Cost of goods and materials	–555,969	–638,227
Personnel expenses	–232,115	–235,295
Depreciation and amortisation	–11,226	–16,017
Other	–105,673	–125,517
	–904,983	–1,015,056

Note 5 Other operating expenses

	2013	2012
Exchange losses on trade receivables/liabilities		–6,494 –13,392
Other	–91	–71
		–6,585 –13,463

Note 7 Employees, personnel expenses and remuneration to senior management

2013	2012
–173,524	–177,548
–	–
–13,547	–13,034
–45,044	–44,713
–232,115	– 235,295

Average number of employees
		2013 Of which men		2012 Of which men
Sweden	280	71%	294	69%
Norway	37	46%	39	47%
UK	28	50%	31	51%
Finland	38	63%	36	36%
Estonia	223	26%	207	29%
China	241	59%	277	64%
Group total	847	53%	884	55%

Division between sexes in group management

*See note 19.

	2013 Share of women	2012 Share of women
Board members, Presidents	27%	18%
Other senior management, 2 (2) people*	0%	0%

*The total number of senior managers in the year.

Senior management's remuneration

Remuneration and other benefits, 2013		Basic salary, Directors' fees	Performance related pay	Other benefits	Pension expenses	Total
Chairman of the Board:	Stefan Charette	300	–	–	–	300
Board members:	Kjell Åke Andersson	100	–	–	–	100
	Bruce Grant	100	–	–	–	100
	Stefan Johansson	160	–	–	–	160
	Henry Klotz	100	–	–	–	100
	Bert Nordberg, left 22 April 2013	33	–	–	–	33
CEO:	Peter Laveson	1,912	–	63	415	2,390
Other senior management (2 people)		2,898	–	171	965	4,034
		5,603	–	234	1,380	7,217

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit for 2013. There was a profitability-based, performance-related remuneration program for the CEO, senior managers, subsidiary Presidents and other key staff, during the financial year 2013. This program had 16 participants. In 2013, an estimated outcome of SEK 0.4 million was charged to the group's profit, of which SEK – million related to senior managers. The Report of the Directors states the details of the remuneration guidelines for senior managers.

Senior management's remuneration

Remuneration and other benefits, 2012		Basic salary, Directors' fees	Performance related pay	Other benefits	Pension expenses	Total
Chairman of the Board:	Stefan Charette	267	–	–	–	267
Board members:	Kjell Åke Andersson	100	–	–	–	100
	Bruce Grant	100	–	–	–	100
	Stefan Johansson	160	–	–	–	160
	Henry Klotz	100	–	–	–	100
	Bert Nordberg, elected 25 April 2012	67	–	–	–	67
CEO:	Peter Laveson	1,821	150	43	397	2,411
Other senior management (2 people)		2,880	100	175	837	3,992
		5,495	250	218	1,234	7,197

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit for 2012. There was a profitability-based, performance-related remuneration program for senior managers, subsidiary Presidents and other key staff, which ran from the midpoint of 2011 for one year. This program had 15 participants. In 2011, an estimated outcome of SEK 1.5 million was charged to the group's profit, of which SEK 0.5 million related to senior managers. However, there was no remuneration paid in the compensation program, and the whole amount was dissolved in 2012. The Report of the Directors states the details of the remuneration guidelines for senior managers.

Note 8 Auditors' fees and reimbursement

	2013	2012
PwC
Auditing assignment	–930	–930
Auditing in addition to audit assignment	–284	–130
Tax consultancy	–198	–136
Other services	–8	–45
Other Auditors
Auditing assignment	–324	–256
Auditing in addition to audit assignment	–25	–67
Tax consultancy	–72	–
Other services	–561	–553

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

Note 10 Tax

Reported in Income Statement	2013	2012
Current tax expense (–)/tax revenue (+)
Tax expense for the period	–1,409	–6,017
Adjustment of tax attributable to previous year	–53	–6
Deferred tax expense (–)/tax revenue (+)
Deferred tax relating to temporary differences/appropriations	–54	–442
Deferred tax revenue/expense in capitalised/utilised tax value in loss carry-forward	1,757	–
Adjustment of tax attributable to previous year	–775	–
Total reported tax in group	–534	–6,465

Note 9 Net financial income/expense

	2013	2012
Interest income on bank balances	428	296
Exchange rate gains	2,846	2,994
Other	100	–
Financial income	3,374	3,290
Interest costs on financial liabilities measured at amortised cost	–3,767	–4,192
Bank charges	–3,039	–2,198
Exchange rate losses	–1,527	–3,491
Other	–2,868	–273
Financial expenses	–11,202 –10,154
Net financial income/expense	–7,828	–6,864

Reported in Income Statement		2013	2012		Reconciliation of effective tax		%	2013	%	2012
Current tax expense (–)/tax revenue (+)				Profit before tax				1,184		19,085
Tax expense for the period		–1,409	–6,017		Tax at applicable rate for parent company		–22.0		–260 –26.3	–5,019
Adjustment of tax attributable to previous year		–53	–6			Effect of other tax rates for foreign subsidiaries	54.3	643	2.2	425
					Effect of change in Swedish tax rate		0.0	–	1.1	198
Deferred tax expense (–)/tax revenue (+)					Non-deductible expenses		–406.3 –4,811		–11.7	–2,242
Deferred tax relating to temporary differences/appropriations		–54	–442	Non-taxable revenue			425.1	5,033	11.3	2,149
Deferred tax revenue/expense in capitalised/utilised tax value in loss		1,757			Un-reported tax revenue on loss for the year		–15.6	–185	–12.0	–2,285
carry-forward			–			Tax attributable to utilised portion of loss carry-forwards	34.0	402	1.7	315
Adjustment of tax attributable to previous year		–775	–		Tax attributable to previous year		–70.0	–828	0.0	–5
Total reported tax in group		–534	–6,465	Other		–44.5	–527	–	–
					Total reported tax in group		–45.1			–534 –33.9 –6,465
	Deferred tax asset				Deferred tax liability				Net
Recognised in Balance Sheet	31 Dec 2013		31 Dec 2012		31 Dec 2013	31 Dec 2012		31 Dec 2013		31 Dec 2012
Property, plant and equipment	390		627		1,879	1,814		–1,488		–1,187
Derivatives measured at fair value	7		–		–	–		7		–
Loss carry-forwards	11,509		12,202		–	–		11,509		12,202
Provisions	1,623		2,843		–	–		1,623		2,843
Untaxed reserves	54		64		553	2,131		–500		–2,067

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. None of the loss carry-forwards are subject to time limitation, SEK 4 million is expected to be utilised in 2014. 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 – (–) million.

Provisions for deferred tax	31 Dec 2013	31 Dec 2012
Carrying amount at beginning of period	3,945	3,387
Amount provisioned in period	282	1,214
Amounts utilised in period	–1,795	–656
	2,432	3,945

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

	Balance as of 1 Jan 2012	Reported in Income Statement	Reported against comprehensive income	Reported directly in equity	Balance as of 31 Dec 2012
Property, plant and equipment	–1,920	658	75	–	–1,187
Derivatives measured at fair value	–8	38	–	–30	–
Loss carry-forward	12,313	–	–111	–	12,202
Provisions	3,038	405	–600	–	2,843
Untaxed reserves	–1,029	–1,150	112	–	–2,067
Other	–	–2	2	–	–
	12,394	–51	–522	–30	11,791

	Balance as of 1 Jan 2013	Reported in Income Statement	Reported against comprehensive income	Reported directly in equity	Balance as of 31 Dec 2013
Property, plant and equipment	–1,187	–380	–	79	–1,488
Derivatives measured at fair value	–	7	–	–	7
Loss carry-forward	12,202	1,561	–670	–1,585	11,509
Provisions	2,843	–1,227	2	5	1,623
Untaxed reserves	–2,067	1,570	–3	–	–500
Other	–	–424	–	424	–
	11,791	1,107	–671	–1,077	11,151

Note 11 Intangible assets

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

	Goodwill, purchased	Capitalised expenditure for software	Trademarks and brands etc.	Total
Cumulative cost
Opening balance, 1 Jan 2012	72,563	1,820	1,389	75,772
Investments	–	1,558	75	1,633
Reclassification and exchange rate effects	1	–	–3	–2
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2012	72,564	3,378	1,461	77,403
Opening balance, 1 Jan 2013	72,564	3,378	1,461	77,403
Investments	–	4,831	–	4,831
Reclassification and exchange rate effects	–236	–	–	–236
Sales and retirements	–	–	5	5
Closing balance, 31 Dec 2013	72,328	8,209	1,466	82,003
Accumulated amortisation and impairment
Opening balance, 1 Jan 2012	–2,035	–1,814	–1,329	–5,178
Reclassification and exchange rate effects	1	–	–	1
Amortisation for the year	–	–58	–59	–117
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2012	–2,034	–1,872	–1,388	–5,294
Opening balance, 1 Jan 2013	–2,034	–1,872	–1,388	–5,294
Reclassification and exchange rate effects	3	–	–4	–1
Amortisation for the year	–	–434	–27	–461
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2013	–2,031	–2,306	–1,419	–5,756
Carrying amounts
As of 1 Jan 2012	70,528	6	60	70,594
As of 31 Dec 2012	70,530	1,506	73	72,109
As of 1 Jan 2013	70,530	1,506	73	72,109
As of 31 Dec 2013	70,297	5,903	47	76,247

Amortisation and impairment

Amortisation and impairment are included in the following Income

Statement lines	2013	2012
Cost of goods sold and services	–461	–111
Administrative expenses	–	–6
	–461	–117

Impairment testing of goodwill

NOTE allocates and tests goodwill in the Nearsourcing Centres and Industrial Plants operating segments. The following table states goodwill values by operating segment.

	31 Dec 2013	31 Dec 2012
Nearsourcing Centres	58,123	58,356
Industrial Plants	12,174	12,174
	70,297	70,530

Impairment tests are based on measurement of value in use, a value based on cash flow forecasts totalling 3 (3) 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 using the assessed growth rate as follows.

Impairment tests are based on the calculated present values of cash flows from each legal entity that is included in each operating segment. The present value of these aggregated cash flows are then compared with the goodwill and capital employed allocated to the operating segment.

The present value of forecast cash flows has been calculated with a discount rate after tax 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 9.5 (10.0) percent, has been used for both business segments. The discount rate before tax is 11.5 (11.8) percent.

The recoverable values for both Nearsourcing Centres and Industrial Plants exceed carrying amounts.

Important variables	Method for defining values
Growth in the forecast period	Market growth has been estimated at 5 (5) percent during the forecast period for all units. Market growth is based on historical experience, estimates in sector research and other externally available information.
Growth after the forecast period	Growth after the forecast period is estimated at 2.0 (2.0) percent.
	Cost of materials Materialkost 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.
Personnel costs	Payroll expenses have been estimated using collective agre ements 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.

Sensitivity analysis, goodwill impairment testing

With the above calculation assumptions and considering the growth and profitability potential estimated by NOTE in its business model, 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 9.5 to 10.5 percentage points, would not imply any impairment. Value in use reduces but still significantly exceeds the carrying amount of both Nearsourcing Centres and Industrial Plants.

Note 12 Property, plant and equipment

	Buildings and land (real estate used in business operations)	Costs incurred on other party's property	Machinery and other plant	Equipment, tools, fixtures and fittings	Total
Cost
Opening balance, 1 Jan 2012	45,198	7,445	127,886	46,774	227,303
Investments	–	108	5,549	818	6,475
Sales	–	–	–3,557	–1,849	–5,406
Reclassification and exchange rate effects	–719	–145	–1,055	–24	–1,943
Closing balance, 31 Dec 2012	44,479	7,407	128,823	45,719	226,429
Opening balance, 1 Jan 2013	44,479	7,408	128,823	45,719	226,429
Investments	–	96	7,635	592	8,323
Sales	–	–	–7,618	–280	–7,898
Reclassification and exchange rate effects	715	64	411	–308	882
Closing balance, 31 Dec 2013	45,194	7,568	129,251	45,723	227,736
Depreciation and impairment
Opening balance, 1 Jan 2012	–17,599	–4,485	–105,172	–43,114	–170,369
Depreciation for the year	–1,726	–1,092	–10,920	–2,163	–15,900
Sales	–	–	2,646	1,849	4,495
Reclassification and exchange rate effects	302	95	714	3	1,114
Closing balance, 31 Dec 2012	–19,023	–5,482	–112,731	–43,424	–180,660
Opening balance, 1 Jan 2013	–19,023	–5,482	–112,731	–43,424	–180,660
Depreciation for the year	–1,721	–192	–7,560	–1,292	–10,765
Sales	965	–	7,136	280	8,381
Reclassification and exchange rate effects	–353	–36	–102	137	–354
Closing balance, 31 Dec 2013	–20,132	–5,710	–113,257	–44,299	–183,398
Carrying amounts
As of 1 Jan 2012	27,599	2,960	22,715	3,660	56,934
As of 31 Dec 2012	25,456	1,925	16,092	2,295	45,769
As of 1 Jan 2013	25,456	1,925	16,092	2,295	45,769
As of 31 Dec 2013	25,062	1,858	15,994	1,424	44,338

Information on central government support in the group

The aggregate cost of the assets the support is intended to cover amounts to 2,470 in the period. The cost reduced by 233 for enacted government support. Total utilised, but not received, investment subsidies amount to 0 on the reporting date. Pledged assets for subsidies received in 2013 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	2013	2012
Cost of goods sold and services		–9,845 –13,289
Administrative expenses	–816	–396
Selling expenses	–104	–2,215
		–10,765 –15,900

Finance leases (leased production equipment)

NOTE leases production equipment through several different finance lease arrangements. As of 31 December 2013, the value of leased assets was 4,294 (3,017).

Collateral

As of 31 December 2013, property with a carrying amount of 25,062 (25,456) was pledged as collateral for bank borrowings.

As of 31 December 2013, there is ownership reservation on machinery, with a carrying amount of 1,866 (–).

Note 13 Long-term receivables and other receivables

	31 Dec 2013	31 Dec 2012
Long-term receivables
Interest-bearing loans	–	750
Other long-term receivables	379	472
	379	1,222
Other receivables that are current assets
Interest-bearing loans	–	2,451
VAT	1,133	4,519
Other	1,056	1,656
	2,189	8,626

Note 14 Inventories

	31 Dec 2013	31 Dec 2012
Raw materials and consumables	124,136	136,972
Products in process	19,229	20,729
Finished goods and goods for re-sale	19,136	19,772
Obsolescence provision	–11,054	–17,951
	151,447	159,522

The expensed inventories for the year are stated in note 6, Operating expenses by type.

Note 15 Prepaid expenses and accrued income

	31 Dec 2013	31 Dec 2012
Accrued income	1,625	2,352
Prepaid services	652	3,883
Prepaid rent	1,442	2,770
Prepaid licenses	1,395	436
Prepaid insurance	424	325
Prepaid lease payments	138	128
Other prepaid expenses	1,061	608
	6,737	10,502

Note 16 Earnings per share

Earnings per share		Before dilution	After dilution
	2013	2012	2013	2012
Earnings per share, SEK	0.02	0.44	0.02	0.44

The calculation of earnings per share for 2013 has been based on profit for the period of SEK 650 (12,620) and on a weighted average number of outstanding shares in 2013 of 28,872,600 (28,872,600).

Earnings per share after dilution

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

Note 17 Equity

Group	Share class A
No. of shares (thousands)	31 Dec 2013	31 Dec 2012
Issued as of 1 January	28,873	28,873
Issued as of 31 December—paid up	28,873	28,873

As of 31 December 2013, registered share capital comprised 28,872,600 shares with a quotient value of SEK 0.50 each. There were no outstanding warrants or other instruments that could result in dilution effects as of 31 December 2013. Shareholders are entitled to dividends, and shareholdings confer the voting rights of one vote per share at the AGM.

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 2013	31 Dec 2012
Opening translation reserve	–4,424	–1,444
Translation differences for the year	–1,355	–2,980
Closing translation reserve	–5,779	–4,424

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 long-term internal loans that are equivalent to equity in subsidiaries.

Hedging reserve	31 Dec 2013	31 Dec 2012
Opening hedging reserve	–	–82
Forecast cash flow hedges for the year	–	82
Closing hedging reserve	–	–

The hedging reserve includes 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 for the period

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

Capital management

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

Growth target

NOTE will increase its market share organically and through acquisitions.

Profitability target

NOTE will grow with profitability. Its target is for a minimum return on 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. For the financial year 2013 the return on operating capital was 3.1 (7.9) percent.

Capital structure target

The minimum equity ratio should be 30 percent. At year-end, the equity to assets ratio was 44.0 (45.2) percent.

Dividend target

The dividend should be adapted to the average profit level over a business cycle and should constitute 30-50 percent of profit after tax for the long term. The dividend should also be available to adapt the capital structure.

Note 18 Interest-bearing liabilities

	31 Dec 2013	31 Dec 2012
Non-current liabilities
Bank loans	265	–
Finance lease liabilities, fixed assets	4,000	3,056
	4,265	3,056
Current liabilities
Overdraft facility	–	–
Factoring	90,443	95,578
Short-term portion of bank loans	796	–
Short-term portion of finance lease liabilities	2,033	2,707
	93,272	98,285

Pledged assets

24,593 (24,115) of collateral for bank loans, finance lease liabilities and overdraft facilities is pledged in the company's land and buildings (see also note 12) and 220,206 (220,029) in operations. Collateral for factoring is issued at an amount of 139,591 (144,223) in pledged accounts receivable—trade.

Fair value of non-current liabilities	Carrying amount			Fair value
	2013	2012	2013	2012
Finance lease liabilities, fixed assets	4,000	3,056	3,863	2,943

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 7.7 (8.3) percent.

Finance lease liabilities

Finance lease liabilities are due for payment as follows:

	Minimum lease payments 2013	Interest 2013	Principal 2013	Minimum lease payments 2012	Interest 2012	Principal 2012
Within one year	2,033	163	1,870	2,707	217	2,490
Between one and five years	4,000	320	3,380	3,056	244	2,812
	6,033	483	5,550	5,763	461	5,302

For more information, see note 23 Financial risks and finance policy on page 51.

Note 19 Pension commitments

Changes to the commitments for defined-benefit plans
reported in the Balance Sheet		2013		2012
Commitments for defined-benefit plans as of 1 January		–		–
Cost of employment in the current period and interest expense (see below)		–		–
Pension payments		–		–
Pension plan taken over by Alecta		–		–
Commitments for defined-benefit plans as of 31 December		–		–
Expense reported in Income Statement
Cost related to employment in the current period		–		–
Interest expense on commitments		–		–
Actuarial losses(+)/gains(–)		–		–
Total net expense in Income Statement		–		–
The measured expense for 2013 amounts to – (–)
Expense reported in the following Income Statement lines
Cost of sold goods and services		–		–
Selling expenses		–		–
Administrative expenses		–		–
Total net expense in Income Statement		–		–
Historical information 2013	2012	2011	2010	2009

Present value of traditional assurance commitments	–	–	–	– 15,658
Experience-based adjustment loss (–)/gain (+)	–	–	–	– –2,910

Alecta

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 2013, 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 2.5 (2.7) million. Alecta's surplus can be divided between policy-holders and/or beneficiaries. At year-end 2013, Alecta's surplus, expressed as a collective consolidation ratio was 153 (129) percent. The 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.

	2013	2012
Expenses for defined-contribution plans1	13,547	13,034

1 Includes 2,528 (2,656) for an ITP plan insured with Alecta.

Note 20 Provisions

Short-term portion of provisions	31 Dec 2013	31 Dec 2012
Expenses for restructuring program measures	–	–
Expenses for resigning CEO	–	–
Other	–	–
	–	–

Expenses for restructuring program measures:

At the beginning of 2010, NOTE decided to intensify its structural transformation. The objective was to execute savings and rationalisation measures to have a minimum annualised positive profit effect of SEK 50 million. As part of this program, the group's electronics manufacturing units were concentrated, in Sweden and internationally. Operations that did not fit were closed down or sold off. Central resources were adapted to prevailing market conditions. The rationalisation package resulted in non-recurring costs totalling some SEK –47 million in 2010, which essentially, was completed as planned in the financial year 2011.

The provision for restructuring program measures as of 31 December 2011 consisted of costs decided for terminated staff, which was paid until October 2012 inclusive.

		Expenses for resig
2012	Restructuring program	ning CEO/other	Total
Carrying amount at beginning of period	1,131	225	1,356
Provisions in the period	–	–	–
Amounts utilised in the period	–1,131	–225	–1,356
Un-utilised amounts reversed in the period	–	–	–
Carrying amount at end of period	–	–	–

2013	Restructuring program	Expenses for resig ning CEO/other	Total
Carrying amount at beginning of period	–	–	–
Provisions in the period	–	–	–
Amounts utilised in the period	–	–	–
Un-utilised amounts reversed in the period	–	–	–
Carrying amount at end of period	–	–	–

Note 21 Other current liabilities

	31 Dec 2013	31 Dec 2012
Staff withholding tax	3,837	3,831
Social security contributions	3,719	3,529
VAT	11,304	12,177
Other	2,288	93
	21,148	19,630

Note 22 Accrued expenses and deferred income

	31 Dec 2013	31 Dec 2012
Accrued salaries and benefits	6,669	5,967
Accrued social security contributions	4,862	4,651
Payment for vacation taken in cash	18,780	18,033
Other	16,379	14,512
	46,690	43,163

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, co-ordination 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 140 (144) million 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 3.5 (3.9) percent was charged to consolidated profit.

NOTE has agreed on a number of covenants to its lender as security for the liabilities.

Liquidity risks

Liquidity risk means the risk of being unable to fulfil payment obligations resulting from insufficient liquidity or difficulties in raising external borrowings. Operations are funded through means such as SEK 238.1 (260.5) million of equity and interest-bearing liabilities of SEK 97.5 (101.3) million, utilised overdrafts of SEK – (–) million are included. The un-utilised overdraft facility was SEK 57.5 (57.3) million at year-end. Financial liabilities comprise loans and the utilised portion of the overdraft and factoring facilities.

Age analysis, financial liabilities

2013, SEK million	Total	Within 1 mth.	1–3 mth.	3 mth. –1 yr.	1–5 yr.	5 yr. and longer
Bank credit facilities inclu ding overdraft & factoring	91.5	36.0	25.5	29.7	0.3	–
Finance lease liabilities	6.0	0.2	0.3	1.5	4.0	–
Derivatives	–	–	–	–	–	–
Accounts payable—trade	133.4	96.6	23.6	13.2	–	–
	230.9	132.8	49.4	44.4	4.3	–
2012, SEK million	Total	Within 1 mth.	1–3 mth.	3 mth. –1 yr.	1–5 yr.	5 yr. and longer
Bank credit facilities inclu ding overdraft & factoring	95.5	–	–	95.5	–	–
Finance lease liabilities	5.8	0.3	0.5	2.0	3.0	–
Derivatives	–	–	–	–	–	–
Accounts payable—trade	144.7	90.0	34.5	20.2	–	–

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. Long 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 which amounted to SEK 56.8 (27.4) million at year end. There were no interest derivatives as of the reporting date, and accordingly, all interest was variable.

Translation exposure

The group's foreign net assets are divided between the following currencies, amounts in SEK 000 and percentage share of NOTE's total equity:

	31 Dec 2013		31 Dec 2012
Currency	Amount	%	Amount	%
CNY	12,507	5.3	19,041	7.3
EUR	16,054	6.7	11,812	4.5
GBP	673	0.3	1,275	0.5
NOK	10,673	4.5	9,635	3.7
	39,907	16.8	41,763	16.0

Credit risks

Credit risks in financing activities Credit risk consists of a party of a transaction being unable to fulfil its financial commitments.

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. Bank guarantees or other collateral are required for customers with low creditworthiness or insufficient credit histories.

The ten biggest customers provide approximately 47 (46) percent of sales. The group has a relatively good diversification of customers across a range of industrial sectors.

Age analysis, accounts receivable—trade	31 Dec 2013	31 Dec 2012
Not overdue accounts receivable—trade	170,123	149,641
Overdue accounts receivable—trade 0–30 days	20,678	31,765
Overdue accounts receivable—trade > 30 days–60 days	4,016	5,570
Overdue accounts receivable—trade > 60 days	9,421	18,428
Impaired accounts receivable—trade	–4,442	–18,452
Total	199,796	186,952

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 translation 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. NOTE adopts a centralised view of managing currency hedges. NOTE's corporate finance function hedges net flows in foreign currency on rolling six-month forecasts, based on the limits stipulated in NOTE's finance policy.

Allocation 6 months from the closing date

	Net exposure from sales and purchasing in foreign currencies		Total hedging			Percentage	Average exchange rate
	2013	2012	2013	2012	2013	2012	2013	2012
EUR	3,495	2,390	1,390	885	40%	37%	8,87	8.60
USD	3,395	4,285	741	936	22%	22%	6,51	6.48

The group classifies its forward contracts used for hedging forecast transactions as cash flow hedging. At year-end, the fair value of NOTE's cash flow hedges was SEK 0.0 (0.0) million.

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 AB manages a substantial portion of materials sourcing agreements.

Sensitivity analysis

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

	Effect on comprehensive income
Market risk, SEK million	+/– 2 %	+/– 5 %
Change in sales price to customers	14.1	35.4
Change in sales volume	3.6	8.9
Change in materials price*	8.7	21.7
Change in payroll overheads	3.7	9.1
Change in interest rates	0.8	2,1
Change in EUR/USD exchange rate on customer and supplier liabilities as of 31 Dec 2013	0.6	1.5
Currency change on net assets in foreign subsidiaries	0.8	2.0

*Disregarding price adjustment clauses to customers.

Note 24 Financial instruments by category

Loans and accounts receivable	Derivatives used for hedging purposes	Other financial liabilities	Total
–	–		–
199,796	–		199,796
40,731	–		40,731
240,527	–		240,527
	–	97,537	97,537
	–	–	–
	–	133,354	133,354
	–	230,891	230,891

31 Dec 2012	Loans and accounts receivable	Derivatives used for hedging purposes	Other financial liabilities	Total
Assets in the Balance Sheet
Derivative instruments	–	–		–
Accounts receivable—trade and other financial receivables	190,154	–		190,154
Cash and cash equivalents	70,723	–		70,723
Total assets	260,877	–		260,877
Liabilities in the Balance Sheet
Interest-bearing liabilities		–	101,341	101,341
Derivative instruments		–	–	–
Accounts payable—trade and other financial liabilities		–	144,672	144,672
Total liabilities		–	246,013	246,013

Note 25 Operating leases

	31 Dec 2013	31 Dec 2012
Lease arrangements payable within one year	3,859	3,224
Lease arrangements payable between one and five years	8,518	6,563
	12,377	9,787

The group's expense for operating leases was 3,779 (3,547).

Note 26 Pledged assets and contingent liabilities

	31 Dec 2013	31 Dec 2012
Pledged assets
In the form of pledged assets for own liabilities and provisions
Property mortgage	24,593	24,115
Floating charge	220,206	220,029
Ownership reservation on machinery	1,866	–
Factored accounts receivable—trade	139,591	144,223
	386,256	388,367
Contingent liabilities
Guarantees issued*	41,776	41,948
County administrative board, conditional loan	904	954
	42,680	42,902

*Guarantees issued were previously reported in the parent company's contingent liabilities.

Note 27 Cash Flow Statement

Interest paid	2013	2012
Interest received	435	258
Interest paid	–2,911	–3,926
Other non-cash items
Impairment losses	5,093	18,273
Unrealised exchange rate differences	–801	939
Capital gain/loss on sale of property, plant and equipment	–892	–339
Other items not affecting liquidity	–735	759
	2,665	19,632

Cash and cash equivalents	31 Dec 2013	31 Dec 2012
Cash and bank balances	40,731	70,723
Un-utilised overdraft facilities	57,482	57,285
	98,213	128,008

Note 28 Close relations

Close relation	Year	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 of parent company/subsidiary	2013	–	–	–	–
Company owned by Board member of parent company/subsidiary	2012	–	–	–	–

Transactions with key staff in executive positions

For the Board of Directors', the CEO's 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 44.

Note 29 Financial definitions	Note 30 Critical estimates and judgements
Market capitalisation Share price multiplied by total number of outstanding shares.	Critical judgements when applying the group's accounting principles Some critical accounting estimates made when applying the group's accounting principles are reviewed below.
Equity per share Equity divided by the number of shares at year-end.	Accounts receivable—trade and inventories
Attendance Attendance as a percentage of regular working-hours.	Accounts receivable—trade and inventories are the largest asset items in value terms on the reporting date. Both these items are reported as net values after deducting for impairment losses, based on individual judgement. The obsolescence reserve on the reporting date 31 December 2013 was SEK -11.1 (-17.9) million and the reserve for doubtful debt was
Average number of employees Average number of employees calculated on the basis of hours worked.	SEK -4.4 (-18.4) million. Note 23 provides more information on the judgements made and information on the risks associated with these asset items.
Rate of capital turnover (operating capital), multiple Sales divided by operating capital.	Goodwill The group's goodwill relates to the Swedish and foreign subsidiaries. Goodwill is subject to
Net investments in property, plant and equipment Investments in property, plant and equipment, excluding acquisitions of assets and liabilities,	impairment tests in accordance with IAS 36 Impairment of Assets. On 31 December 2013, goodwill on consolidation was SEK 70.3 (70.5) million. Note 11 states more information on the measurement of goodwill items.
less sales and retirements for the year. Net debt/equity ratio, multiple Interest-bearing net debt divided by equity.	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 2013, the consolidated
Sales per employee Sales divided by the average number of full-time employees.	deferred tax asset was SEK 13.6 (15.7) million. Note 10 states more information on the group's deferred tax assets.
Operating capital Total assets less cash and cash equivalents, non-interest bearing liabilities and provisions.

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 after financial items plus financial expenses divided by financial expenses.

Operating margin Operating profit as a percentage of net sales.

Equity to assets ratio Equity as a percentage of total assets.

Profit margin Profit after financial items as a percentage of net sales

Note 31 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	2013	2012
Net revenue		36,158	36,681
Cost of sold services		–23,868	–24,110
Gross profit		12,290	12,571
Selling expenses		–5,365	–4,104
Administrative expenses		–9,244	–10,200
Other operating revenue	2	126	38
Other operating expenses	3	–32	–38
Operating profit	4, 5, 15, 17	–2,225	–1,733
Profit from financial items	6
Profit from participations in group companies		93	27,828
Interest income, etc.		5,935	5,672
Interest costs, etc.		–2,292	–4,384
Profit after financial items		1,511	27,383
Appropriations	7	5,515	–4,463
Profit before tax		7,026	22,920
Tax	8	2,268	–4,227
Profit for the year		9,294	18,693

Parent Company Statement of Other Comprehensive Income

SEK 000	2013	2012
Profit for the year	9,294	18,693
Other comprehensive income
Fair value reserve	2,299	–2,660
Tax on fair value reserve	–398	700
Total comprehensive income for the year	11,195	16,733

Parent Company Balance Sheet

SEK 000	NOTE	31 Dec 2013	31 Dec 2012
ASSETS
Non-current assets
Intangible assets
Capitalised expenditure on development work	9	4,162	–
Property, plant and equipment	9	–	–
Financial assets
Participations in group companies	18	245,233	245,233
Other receivables	10	–	750
Receivables from group companies	10	61,356	83,946
Deffered tax assets	8	2,268	–
Total financial assets		308,857	329,929
Total non-current assets		313,019	329,929
Current assets
Short-term receivables
Accounts receivable—trade		–	24
Receivables from group companies	11	28,218	25,000
Other receivables	12	0	2,710
Prepaid expenses and accrued income		1,207	2,949
Total short-term receivables		29,425	30,683
Cash and bank balances	19	15,647	36,480
Total current assets		45,072	67,163
TOTAL ASSETS		358,091	397,092
EQUITY AND LIABILITIES
Equity
Restricted equity
Share capital (28,872,600/28,872,600 class A shares)		14,436	14 436
Statutory reserve		148,161	148,161
Non-restricted equity
Profit brought forward		87,155	88,215
Profit for the year		9,294	18,693
Total equity		259,046	269,505
Un-taxed reserves		–	5,515
Provisions	13	–	–
Current liabilities
Account payable—trade		1,163	2,376
Liabilities to group companies		87,951	108,006
Other liabilities		2,211	3,528
Accrued expensed and deferred income	14	7,720	8,162
Total current liabilities		99,045	122,072
TOTAL EQUITY AND LIABILITIES		358,091	397,092
Pledged assets and contingent liabilities for parent company
Pledged assets	16	–	–
Contingent liabilities	16	49,827	49,999

Summary Statement of Changes in Parent Company's Equity

		Restricted equity		Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit brought forward	Profit for the year	Total equity
Opening equity, 1 Jan 2012	14,436	148,161	74,681	24,156	261,434
Appropriation of profit			24,156	–24,156	–
Comprehensive income
Profit for the year	–	–	–	18,693	18,693
Other comprehensive income
Fair value reserve			–2,660		–2,660
Tax on fair value reserve			700		700
Total comprehensive income	–	–	–1,960	18,693	16,733
Transactions with shareholders
Dividend	–	–	–8,662	–	–8,662
Closing equity, 31 Dec 2012	14,436	148,161	88,215	18,693	269,505

		Restricted equity	Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit brought forward	Profit for the year	Total equity
Opening equity, 1 Jan 2013	14,436	148,161	88,215	18,693	269,505
Appropriation of profit			18,693	–18,693	–
Comprehensive income
Profit for the year	–	–	–	9,294	9,294
Other comprehensive income
Fair value reserve			2,299		2,299
Tax on fair value reserve			–398		–398
Total comprehensive income	–	–	1,901	9,294	11,195
Transactions with shareholders
Dividend	–	–	–21,654	–	–21,654
Closing equity, 31 Dec 2013	14,436	148,161	87,155	9,294	259,046

Parent Company Cash Flow Statement

SEK 000	NOTE	2013	2012
Operating activities	19
Profit before tax		1,511	27,383
Reversed depreciation		–	8
Other non-cash items		–33,877	2,676
Tax paid		–1,682	–1,833
		–34,048	28,234
Cash flow from change in working capital
Increase (–)/decrease (+) in trade receivables		30,313	6,127
Increase (+)/decrease (–) in trade liabilities		–14,886	–16,992
		15,427	–10,865
Cash flow from operating activities		–18 621	17,369
Investing activities
Purchase of intangible assets		–4,162	–
Sale of property, plant and equipment		–	29
Purchase of other financial assets		–	–12,671
Sale of financial assets		3,201	360
Cash flow from investing activities		–961	–12,282
Financing activities
Amortisation of loans		–	–16,636
Dividends paid		–21,654	–8,662
Group contributions received		26,757	50,970
Group contributions paid		–6,354	–7,557
Cash flow from financing activities		–1,251	18,115
Cash flow for the year		–20,833	23,202
Cash and cash equivalents
At beginning of period		36,480	13,278
Cash flow before financing activities		–19,582	5,087
Cash flow from financing activities		–1,251	18,115
Cash and cash equivalents at end of period		15,647	36,480

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 exemptions 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.

Loans to subsidiaries

The parent company lends funds to subsidiaries in foreign currency. A portion of these loans is considered as a portion of net investments in subsidiaries, and accordingly, revaluation at closing day rates from these loans is recognised in equity in the fair value reserve. Other loans receivable in foreign currency are revalued at closing day rates and the revaluation is recognised in the Income Statement.

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 recognised 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.

Note 2 Other operating revenue

	2013	2012
Gains on sale of non-current assets	–	7
Exchange gains on trade receivables/liabilities	126	31
	126	38

Note 3 Other operating expenses

	2013	2012
Loss on sale/retirement of non-current assets	–	–
Exchange losses on trade receivables/liabilities	–32	–38
	–32	–38

Note 4 Auditors' fees and reimbursement

	2013	2012
PwC
Auditing assignment	–360	–340
Auditing in addition to audit assignment	–31	–130
Tax consultancy	–53	–136
Other services	–49	–45
	–493	–651

Note 5 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits

			2013	2012
Salaries and benefits			–11,415	–10,846
Pension expenses, defined-contribution plans			–3,057	–3,033
Social security contributions			–4,593	–4,764
			–19,065	–18,643
Average number of employees	2013	Of which men	2012	Of which men
Sweden	10	69%	11	63%
	10	69%	11	63%

Division between sexes in management	2013 Share of women	2012 Share of women
Board of Directors	0%	0%
Other senior management 3 (3) people	0%	0%

Salaries, other benefits and social security contributions

		2013	2012
	Salaries & benefits (of which bonus)	Social security contributions (of which pen sion expense)	Salaries & benefits (of which bonus)	Social security contributions (of which pen sion expense)
Management	5,603	–3,475	–5,963	–3,407
	(–)	(–1,379)	(–250)	(–1,234)
Other employees	–6,605	–4,175	–5,677	–4,390
	(–)	(–1,678)	(–60)	(–1,799)

Comments on the table:

The company's management means the Board of Directors and the group management.

Note 6 Net financial income/expense

	2013	2012
Profit from participations in group companies
Impairment, shares in subsidiaries	–21,992	–
Write-down, receivables from subsidiaries	–4,606	–
Capital gains from the sale of shares in group companies	–	360
Dividend from group companies	44,464	7,065
Group contributions, received	17,905	26,757
Group contributions, paid	–35,678	–6,354
	93	27,828
Interest income, etc.
Interest income, group companies	4,404	2,557
Exchange rate differences	30	161
Interest income, other	1,501	2,954
	5,935	5,672
Interest costs, etc.
Interest costs, group companies	–3	–338
Interest costs, other	–151	–672
Exchange rate differences	–1,460	–3,036
Other	–678	–338
	–2,292	–4,384

Note 7 Appropriations

	2013	2012
Tax allocation reserve, provision/dissolved for the year	5,515	–4,463
	5,515	–4,463

Note 8 Tax

Reported in Income Statement			2013	2012
Current tax expense (–)/tax revenue (+)
Tax expense/tax revenue for the period			–	–4,227
Deferred tax expense (–)/tax revenue (+)
Deferred tax revenue/expense in capitalised/utilised tax values of loss
carry-forwards			2,268	–
Total reported tax			2,268	–4,227
Reconciliation of effective tax	%	2013	%	2012
Profit before tax		7,025		22,920
Tax at applicable rate for parent company	–22.0	–1,546		–26.3 –6,028
Non-deductible expenses	–85.6	–6,012	–0.6	–151

Non-taxable revenue 139.9 9,826 8.5 1,952

32.3 2,268 –18.4 –4,227

Note 9 Property, plant and equipment

	Capitalised expenditure on development work	Equipment, tools,fixtures and fittings
Cost
Opening balance, 1 Jan 2012	–	216
Sales and retirements	–	–33
Closing balance, 31 Dec 2012	–	183
Opening balance, 1 Jan 2013	–	183
Purchases	4,162	–
Sales and retirements	–	–
Closing balance, 31 Dec 2013	4,162	183
Depreciation
Opening balance, 1 Jan 2012	–	–184
Depreciation for the year	–	–8
Sales and retirements	–	9
Closing balance, 31 Dec 2012	–	–183
Opening balance, 1 Jan 2013	–	–183
Depreciation for the year	–	–
Sales and retirements	–	–
Closing balance, 31 Dec 2013	–	–183
Carrying amounts
1 Jan 2012	–	32
31 Dec 2012	–	–
1 Jan 2013	–	–
31 Dec 2013	4,162	–
Depreciation and impairment
Depreciation is included in the following Income Statement lines		2013 2012

Cost of goods sold and services – – Administrative expenses – –8

– –8

Note 10 Long-term receivables

	31 Dec 2013	31 Dec 2012
Long-term receivables
Receivables from group companies	61,356	83,946
Interest-bearing receivables	–	750
	61,356	84,696
Cumulative cost
Long-term receivables
At beginning of year	84,696	92,523
Reclassification to current receivables	–	–3,250
Purchase	2,009	–2,864
Re-payment	–25,349	–1,712
	61,356	84,696

Note 11 Short-term receivables from group companies

	31 Dec 2013	31 Dec 2012
Cumulative cost
At beginning of year	25,000	14,433
Overdraft facility	8 918	4,318
Accounts receivable—trade, short-term receivables	12,964	20,682
Re-paid liabilities	–18,664	–14,433
	28,218	25,000

Note 12 Other receivables

	31 Dec 2013	31 Dec 2012
Interest-bearing receivable	–	2,451
VAT receivable	–	259
Other short-term receivables	–	–
	–	2,710

Note 13 Provisions

	31 Dec 2013	31 Dec 2012
Carrying amount at beginning of period	–	188
Amounts utilised in the period	–	–188
Carrying amount at end of period	–	–
Of which total long-term portion of provisions	–	–
Of which total short-term portion of provisions	–	–

The parent company's provisions are for salary and severance pay for a previous CEO.

Note 14 Accrued expenses and deferred income

	31 Dec 2013	31 Dec 2012
Accrued consulting fees	1,366	2,119
Accrued salaries and benefits	1,627	1,392
Accrued social security contributions	2,385	2,312
Payment for vacation taken in cash	1,701	1,575
Other	642	764
	7,720	8,162

Note 15 Operating leases

	2013	2012
Lease arrangements payable within one year	1,155	1,074
Lease arrangements payable between one and five years	995	2,060
	2,150	3,134

Parent company expenses for operating leases were 1,251 (383).

Note 16 Pledged assets and contingent liabilities

	31 Dec 2013	31 Dec 2012
Contingent liabilities
Rent guarantee	216	216
Sureties in favour of subsidiaries	49,611	49,783
	49,827	49,999

*Including subsidiary undertakings in customer contracts and the comparative year has been adjusted by SEK 30 million. The exposure of these customer contracts amounted to SEK 32.3 (17.3).million.

Note 17 Close relations

Close relation	Year	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	2013	–	–	–	–
Company owned by Board member	2012	–	–	–	–

Transactions with key staff in executive positions

For the Board of Directors', the CEO's 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 for the group.

Note 18 Group companies

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

Subsidiary Sweden/Corporate identity no./Registered office	No. of shares	31 Dec 2013 Carrying amount	31 Dec 2012 Carrying amount
NOTE Components AB, 556602-2116, Danderyd, Sweden	1,000	100	100
NOTE International AB, 556655-6782, Danderyd, Sweden	1,000	100	100
NOTE Järfälla AB, 556749-2409, Järfälla, Sweden	1,000	1,500	1,500
NOTE Lund AB, 556317-0355, Lund, Sweden	10,661	43,091	43,091
NOTE Norrtelje AB, 556235-3853, Norrtälje, Sweden	1,000	60,719	60,719
NOTE Nyköping-Skänninge AB, 556161-4339, Skänninge, Sweden	9,000	8,190	8,190
NOTE Skellefteå AB, 556430-0183, Skellefteå, Sweden	5,000	16,078	16,078
NOTE Torsby AB, 556597-6114, Torsby, Sweden	30,000	3,000	3,000
Subsidiary other/Corporate identity no./Registered office
IONOTE Electronics (Dongguan) Ltd, 441900400100981, Dongguan, China	1	47,630	47,630
NOTE Components Gdansk Sp. z o.o, 583-26-15-588, Gdansk, Poland	333	–	–
NOTE Hyvinkää Oy, 1931805-1, Hyvinkää, Finland	80	1 347	1,347
NOTE Norge AS, 982 609 380, Oslo, Norway	1,000	22,354	22,354
NOTE Pärnu OÜ, 10358547, Pärnu, Estonia	1	26,887	26,887
NOTE UK Ltd, 5257074, Telford, UK	1,850,000	14,237	14,237
		245,233	245,233

The participating interest is 100 (100) percent in all companies. The subsidiary NOTE Components Gdansk Sp.z o.o. was liquidated in 2012.

Cumulative cost	31 Dec 2013	31 Dec 2012
At beginning of year	254,778	308,472
Sales	–	–53,694
Shareholder contributions	21,992	–
	276,770	254,778
Cumulative impairment
At beginning of year	–9,545	–58,239
Sales	–	48,694
Impairment for the year	–21,992	–
	–31,537	–9,545
Net carrying amount	245,233	245,233

Note 19 Cash Flow Statement

Interest paid and dividend received	2013	2012
Interest received	4,434	2,718
Interest paid	–154	–1,010
Dividend received	3,407	7,064
Other non-cash items
Capital gain on sold non-current assets	–	–5
Capital gain on sale of operation/subsidiary	–	–360
Liquidation/impairment of shares and subsidiaries	–	5,000
Anticipated dividends from subsidiaries	–40,994	–
Impairment of financial assets	24,597	–
Group contributions received/paid in the year	–17,773	–
Other items not affecting liquidity	293	–1,959
	–33,877	2 676
Cash and cash equivalents	31 Dec 2013	31 Dec 2012
Cash and bank balances	15,647	36,480
Un-utilised credit facilities
Un-utilised credit facilities	45,000	45,000

Note 20 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 Stockholm.

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 2013 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, 26 February 2014

Stefan Charette Chairman

Kjell-Åke Andersson Bruce Grant Stefan Johansson

Board member Board member Board member

Henry Klotz Christoffer Skogh Board member Board member/Employee representative

CEO

As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 26 February 2014. The Consolidated Income Statement and Consolidated Balance Sheet and the Parent Company Income Statement and Parent Company Balance Sheet will be subject to adoption at the Annual General Meeting on 25 April 2014.

Our Audit Report was presented on 27 February 2014

Öhrlings PricewaterhouseCoopers AB

Magnus Brändström Auditor in Charge Authorised Public Accountant

Audit Report

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

Report on the annual accounts and consolidated accounts

We have audited the annual accounts and consolidated accounts of NOTE AB for the year 2013. The annual accounts and consolidated accounts of the company are included in the printed version of this document on pages 25-62.

Responsibilities of the Board of Directors and the Managing Director for the annual accounts and consolidated accounts

The Board of Directors and the Managing Director are responsible for the preparation and fair presentation of these annual accounts in accordance with the Annual Accounts Act and of the consolidated accounts in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act, and for such internal control as the Board of Directors and the Managing Director determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these annual accounts and consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the annual accounts and consolidated accounts are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the annual accounts and consolidated accounts. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the annual accounts and consolidated accounts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the annual accounts and consolidated accounts in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors and the Managing Director, as well as evaluating the overall presentation of the annual accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the parent company as of 31 December 2013 and of its financial performance and its cash flows for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2013 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the EU, and the Annual Accounts Act. A corporate governance statement has been prepared. The statutory administration report and the corporate governance statement are consistent with the other parts of the annual accounts and consolidated accounts.

We therefore recommend that the annual meeting of shareholders adopt the income statement and balance sheet for the parent company and the group.

Report on other legal and regulatory requirements

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the proposed appropriations of the company's profit or loss and the administration of the Board of Directors and the Managing Director of NOTE AB (publ) for the year 2013.

Responsibilities of the Board of Directors and the Managing Director

The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss, and the Board of Directors and the Managing Director are responsible for administration under the Companies Act.

Auditor's responsibility

Our responsibility is to express an opinion with reasonable assurance on the proposed appropriations of the company's profit or loss and on the administration based on our audit. We conducted the audit in accordance with generally accepted auditing standards in Sweden.

As a basis for our opinion on the Board of Directors' proposed appropriations of the company's profit or loss, we examined whether the proposal is in accordance with the Companies Act.

As a basis for our opinion concerning discharge from liability, in addition to our audit of the annual accounts and consolidated accounts, we examined significant decisions, actions taken and circumstances of the company in order to determine whether any member of the Board of Directors or the Managing Director is liable to the company. We also examined whether any member of the Board of Directors or the Managing Director has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.

Opinions

We recommend to the annual meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.

Stockholm, Sweden, 27 February 2014 Öhrlings PricewaterhouseCoopers AB

Magnus Brändström Auditor in Charge Authorised Public Accountant

Addresses

NOTE AB (publ) Box 711

Sweden

Vendevägen 85 A 182 17 Danderyd

NOTE Norrtelje AB Box 185

Vilhelm Mobergs gata 18 761 22 Norrtälje Sweden

NOTE Components AB Box 711 Vendevägen 85 A 182 17 Danderyd Sweden

NOTE Hyvinkää Oy Avainkierto 3 05840 Hyvinkää Finland

NOTE Järfälla AB

Saldovägen 1 175 62 Järfälla Sweden

NOTE Lund AB

Maskinvägen 3 227 30 Lund Sweden

NOTE Norge AS

Jogstadveien 21 2007 Kjeller Norway

Website: www.note.eu Email: info@note.eu

NOTE Pärnu OÜ Laki 2 80010 Pärnu

Estonia

NOTE Torsby AB

Inova Park 685 29 Torsby Sweden

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

IONOTE Electronics

(Dongguan) Ltd No. 6 Ling Dong 3 Road Lincun Industrial Center Tangxia 523710 Dongguan Guangdong Province 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 2013 Corporate identity number 556408-8770

Text: NOTE AB (publ). Production and graphic design: Olsson & Per. Images: Jann Lipka, NOTE AB (publ) and Olsson & Per. Printing: Billes Tryckeri AB. Translation: Turner & Turner.