Annual Report

2017

INTRODUCTION

This is NOTE		2
CEO's statement		4

OPERATIONS

Vision, business concept, strategy and targets
Business model	8
Value-creating partnerships with customers	10
Market and competitors	12
Risk management	13

SUSTAINABILITY REPORT

Sustainability	14
UN Global Compact	17
Human resources	20

THE NOTE SHARE

Share data and shareholders	24

CORPORATE GOVERNANCE

Corporate Governance Report	26
Group Management	33
Board of Directors	34

FORMAL ANNUAL ACCOUNTS

Report of the Directors	37
Five-year summary	41
Consolidated Financial Statements	44
Notes on the Consolidated Financial Statements	48
Parent Company's Financial Statements	60
Notes on the Parent Company's Financial Statements	64
Auditor's report	69

Shareholders' information

Annual General Meeting

The AGM (Annual General Meeting) will be held at 2:00 p.m. on Thursday, 26 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 20 April, and notify NOTE of their intention to participate by no later than 20 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 dividend of SEK 1.00 (0.70) per share is paid to shareholders for the financial year 2017.

Nomination Committee

The Nomination Committee has the following members:

Fredrik Hagberg, Myggenäs Gård AB Johan Hagberg, personal holdings Jonas Hagströmer, Creades AB Martin Nilsson, Catella Fondförvaltning

Financial information

Calendar

Interim Report, Jan–Mar 26 Apr 2018 Interim Report, Jan–Jun 16 Jul 2018 Interim Report, Jan–Sep 18 Oct 2018

Investor relations contacts

Henrik Nygren Chief Financial Officer Tel: +46 (0)70 977 0686 E-mail: [email protected]

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 E-mail: [email protected] Tel: +46 (0)8 568 99000 Address: NOTE AB (publ), Box 1285, 164 29 Kista, Sweden

This is NOTE

NOTE is one of the leading EMS partners in northern Europe. NOTE manufactures high end electronics on assignment from customers at seven state-of-the-art plants across Europe and Asia.

NOTE produces PCBAs, subassemblies, and increasingly, box build products. NOTE's products are embedded in complex systems used in applications including electronic control, surveillance and security.

Most of NOTE's customers are active in medtech, defence, manufacturing, communication and high end consumer electronics. Primarily, NOTE's customer base consists of large corporations operating on the global market, but also businesses whose main sales are in northern Europe.

NOTE's business model is based on delivering value-added consulting services and manufacture, as well as tailored logistics solutions for the best total cost. NOTE's customer offering covers complete product lifecycles, from design to after-sales.

In Western Europe, NOTE has plants located in geographical regions with high industrial activity and innovation capabilities. At these plants, NOTE provides sophisticated production technology services in close partnership with customers, such as component selection, developing test equipment, prototyping and batch production.

NOTE's plants in Estonia and China are close to major final markets, and in regions with strong traditions of production and high skills levels. Over and above development-oriented services, NOTE also provides cost-efficient batch production of PCBAs and box build products.

Key facts

History: Founded in 1999.
Employee headcount on 31 December 2017: 936.
Manufacturing units in Sweden, Finland, the UK, Estonia and China.
Share: NOTE's initial public offering was in 2004. The share is quoted on Nasdaq Stockholm (Small Cap/ Industrial Goods & Services). At year-end 2017, the share price was SEK 24.30. Market capitalisation was SEK 702 m, divided between 28,872,600 shares.

Overview, SEK million	2017	2016	Delta
Net revenue	1,175.7	1,098.1	77.6
Operating profit	93.4	60.2	33.2
Operating margin, %	7.9	5.5	2.4
Profit before tax	88.8	54.5	34.3
Profit for the year	72.1	45.2	26.9
Cash flow after investments	69.7	40.9	28.8

Earnings per share

Cash flow per share, after investments

CEO's statement

2017 was a good year for NOTE. Looking back, we can conclude that sales, operating profit and quality levels were the best for five years. Our order book is at record levels, and kept growing in the year.

Long-term customer relations and partnerships

With the strong finish we put into 2017, I think I'm justified in saying that we have advanced our positioning in several market segments, and that interest in our skills in box build and other services is still increasing. We expect the EMS market to keep growing by 4 to 5 percent per year over the coming five-year period, which provides us with a foundation for continued growth. We express our financial target of growing market share as an ambition to grow by 10 percent annually, and thus become one of the highest-growth companies in our sector.

Our customer base is diverse and we're already partnering with several of the leading corporations in the Nordics across a broad spectrum of sectors. We see good growth potential in deeper collaborations with existing industrial and manufacturing customers, as well as in medtech and defence.

We currently have over 300 customers, providing us with a stable and broad base to grow on, although we do need new business customers. This is why we've been working for some time on expanding our customer base, adding new projects and partners in sectors where we are already strong, and this is starting to pay off. One important cornerstone of our continued growth is focusing on new

business customers with the potential to achieve minimum sales of SEK 10 million. This size means we can focus our sales efforts and invest time with customers to understand their needs, build trust and enable partnerships. Some of the major partnerships we previously announced include Cellmark, myFC and Saab.

We tend to keep our customers, with some 80 percent of our sales sourced from customer partnerships more than five years old. This combination of stability with the interest we've noted from new business customers is something we'll keep building on.

We also want to be part of new high-growth application segments. The connected society is driving the demand for electronics in several new sectors. As the Internet of Things becomes more of a reality, the size of our market expands. And here, we can successfully bring our EMS skills to new players and established groups.

Organisation for growth

We kept building our organisation for growth in the year. The year featured new, even more streamlined production lines, training for our staff and hiring. We reduced our staffing by 6 percent in 2017, while sales from our plants were up by 9 percent, which demonstrates our increased efficiency, stable processes and cost control, even when we're

growing. We are investing in training for our people who work close to customers, and for our skilled technicians and operators—one example here is the initiative we started to increase the number of green belts in production.

I'd like to thank all our loyal staff for the past year, a period when many of you worked overtime, went the extra mile and found innovative solutions to make deliveries for our customers. I'd like to congratulate Tia Mellberg, our Employee of the Year, especially. You can read more about her on page 21.

Like all other organisations, we're made up of people, who need to work together towards a shared goal. Realising the meaning of our vision and core values, and clarifying personal responsibility were key leadership issues for me in 2017. Countering all forms of discrimination has been high on the agenda for a long time at NOTE, and we decided to implement an improved whistleblower function.

Continuous improvement, quality and sustainability

Continuous improvement has been a longtime guiding principle in our production. In the year, we reached our target of 99.9 percent product approval, which given our flexible setups and market segment, is a leading figure. The trend in our quality is positive, with gains of some 40 percent on One important cornerstone of our continued growth is focusing on new business customers with the potential to achieve minimum sales of SEK 10 million.

three years ago. Quality is also one of our core values, and if we don't perform here, customer satisfaction, loyalty and profitability will eventually be lost. Our quality work starts from scheduled follow-ups, combined with enhanced technology monitoring more stages of the process. Increased optical inspection, X-ray solder joint inspection and better wash stations are just a few of the technical improvements we installed in the year.

Our customers are almost unanimous in viewing the environment as the most important sustainability aspect in the immediate future. NOTE has been supporting the UN Global Compact since 2011, measuring production spillage and energy consumption at our plants, amongst other metrics. All units have documented environmental work pursuant to the ISO standard, and our central sourcing team applies traceability, and RoHS and Reach compliance standards to our critical suppliers.

Our plants enable production close to customers' final markets, thus reducing our environmental impact.

2018 and beyond

NOTE is well prepared. Our Balance Sheet is one of the sector's strongest with low net debt and an equity/assets ratio of nearly 50 percent, well above our communicated target of 30 percent. Demand is increasing quickly, with our order books expanding. We should also add that we're securing orders covering us further ahead into the future than usual, which confers us with stability in 2018. This is also a precondition for delivering products on time, now that the component market is under strain. One key mission is to balance and optimise inventory levels simultaneous with maintaining sufficient delivery capability.

Per Ovrén

Vision, business concept, strategy and targets

Digitalisation and the need to be constantly connected is growing, as is the usage of electronics in products that used to be mechanical. NOTE is playing an active role in this process. Its goal is to be the best collaboration partner in the sector, adding value by bringing leading quality and high delivery precision for a competitive cost.

Vision

NOTE—the customer's obvious EMS partner.

NOTE will be the best collaborative partner in the sector, and add value for customers by bringing sector-leading quality and high delivery precision for a competitive cost. NOTE takes on daily responsibility for function-critical products, which are often embedded in our customers' larger systems. Customers should feel secure with NOTE as a supplier, and that production, shipments and sourcing are managed so their core business can progress.

In-house, NOTE adopts the view that its customers should not have any reason to choose a different partner. "We make it work."

Business concept

NOTE is a leading northern European EMS partner with an international platform for manufacturing electronicsbased products that require high technology competence and flexibility.

A clear growth agenda with three main lines:

Increase our current business while expanding our services portfolio.
Attract new customers with minimum revenue potential of SEK 10 million in those segments where we are already strong: medtech, defence, industrial and communication.
Execute carefully selected acquisitions and production takeovers.

To succeed, we need:

To retain sector-leading quality and delivery precision.
Flexibility and responsiveness to customer needs.
To offer competitive component pricing.
To optimise capacity utilisation and manufacture where the conditions are optimal.

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 its capital structure.

Values

Committed

We are solution oriented and offer a stimulating working environment, internally and for our customers, locally and globally.

Proactive

We communicate early and endeavour to do good business on a professional, clear and appropriate basis.

Quality focused

"Get it right from the start." There's a quality focus in everything we do. High quality leads to customer satisfaction, loyalty and profitability.

Flexible

We are always looking for the most cost-efficient way to satisfy customerdemand optimally, adjusting setups as required.

Business model

NOTE manufactures electronics and box build products on assignment from customers. Maintaining high quality and flexibility, NOTE manufactures products for industrial use that need to cope in demanding environmental conditions such as extreme cold, heat, humidity, desert and tropical rainstorms.

A partner with a strong, complete offering

NOTE manufactures PCBAs, subassemblies and, increasingly, box build products. Manufacture is at seven stateof-the-art, flexible plants in Europe and Asia, which offer solutions right through product lifecycles—from design to aftersales, in long or short batches.

Its customer offering especially addresses the high mix segment, which applies stringent standards of flexibility and technological competence in manufacture, because products in this segment often have to adapt to satisfy specific customer needs over time. These needs may change for different reasons, commercial or technological, such as dependency on lead-times, predictability and testing requirements. These products are often embedded in customers' end-products, such as control systems, sophisticated communication equipment and various types of metrology instrument. NOTE's customers are mainly in the industrial, communication, medtech, defence and high end consumer sectors. Industrialisation services including prototyping, as well as tailored logistics solutions and after sales services are components of NOTE's customer offering. Because materials often make up

the majority of total cost, NOTE offers competitive pricing of electronic components and other production materials. NOTE provides this to all customers through a structured, quality-assured process and effective interplay between its central sourcing function and local sourcing departments at each plant. NOTE operates an established partnering model, which brings competence to segments such as mechanical engineering, plastics, cabling and displays, to ensure competitiveness in box build manufacture.

* New Product Introduction, NOTE has 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.

Getting things right from the start creates value-added

A close, early-phase dialogue with customers brings NOTE complete understanding of the product and its lifecycle. In combination with highly developed sourcing competence, this offers great potential to manage production and the supply chain so that total cost is favourable. NOTE creates value-added for both parties by avoiding costly mistakes and re-thinks.

Customer needs determine the location of batch production. Decisive factors may be the customer's geographical final market, cost structure, volume and currency risks.

The closeness that NOTE provides customers is critical when projects require continuous contact and the exchange of best practice between the partners. Dialogue back in the design and industrialisation phases on materials selection, sustainability classification, production techniques and functional testing, enables the development of the best product possible, optimised for batch production. NOTE helps to shorten

lead-times from when a product reaches final markets, reducing capital tied up, and conferring competitive edges on the market for the customer.

Focused rationalisation work

With the aim of further sharpening competitiveness and creating the potential for profitable sales growth, NOTE has been managing methodical improvement work at all plants for several years. This work is conducted locally at each plant, and through a variety of group-wide projects. Over and above initiatives to expand and improve its customer offering, NOTE focuses on actions that improve delivery precision and quality levels, performance, and rationalisation in the cost and working capital segments.

NOTE creates competitiveness by delivering the right quality at the right time for a favourable total cost. NOTE's services are in continuous evolution and improvement, with the aim of satisfying customers' current standards and expectations. In recent years, NOTE has achieved sector leadership in quality and delivery precision.

ISO 9000 is a family of international standards that are the foundation of NOTE's quality work. All NOTE plants hold ISO 9001 certification. Most plants also hold the ISO 13485 medtech standard. While ISO-certified management systems are the foundation of quality work, NOTE's people make the real improvements through their focus, attitude, consistent follow-up and methodical work. NOTE achieved its targets in the quality segment in 2017.

Sustainability

Sustainability issues are an important and integrated component of business activities. Back in 2011, NOTE was one of the first companies in its sector to join the Global Compact, started on a UN initiative. Several NOTE functions help limit the negative environmental impact associated with manufacture and transportation, and ensure compliance with policies and directives in the sustainability segment.

	Certifications
--	----------------

	NOTE TORSBY AB	NOTE NORRTELJE AB	NOTE LUND AB	NOTE HYVINKÄÄ OY	NOTE UK LTD	NOTE PÄRNU OÜ	NOTE ELECTRONICS (DONGGUAN) CO LTD
ISO 9001	•	•	•	•	•	•	•
ISO 13485	•	•	•				•
ISO 14001	•	•	•	•	•	•	•
OHSAS 18001				•		•	•
	Sweden	Sweden	Sweden	Finland	UK	Estonia	China

Value-creating partnerships with customers

NOTE is a flexible company that wants to create value through cost-efficient solutions for technologically sophisticated products in partnership with its customers. Meet Hiab, RaySafe and RCO–just three of NOTE's 300-plus customers.

Hiab—a world leader in on-road load handling

Hiab is a vendor of equipment, intelligent services and digital solutions for on-road load handling.

The collaboration between NOTE in Pärnu, Estonia, and Hiab has been ongoing for six years and involves the volume production of PCBAs and subassemblies. Manufacturing is for a variety of product families, including control units for cranes. NOTE also manages product shipping to France, Poland, Spain and Sweden.

"We're really satisfied with our partnership with NOTE on the products in our control system. NOTE is a contemporary, lean-oriented supplier that performs well in quality and delivery precision," said Roger Rahm, of Sourcing & Supplier relations at Hiab.

RaySafe reduces the risk of harmful X-rays

Unfors RaySafe AB provides extensive solutions for X-ray facilities. The foundation of its product offering is a combination of user-friendliness, specialist technology and maximum precision.

Its products integrate complex technology and are developed to minimise the risk of exposure to unnecessary radiation in mammograms and other procedures. RaySafe's equipment employs technology and formulas to translate radiation into a numerical value that the user reads and monitors to ensure that radiation does not reach excessive or hazardous levels.

NOTE Norrtälje, Sweden, has been assisting RaySafe in optimising its products for batch production since 2010 and has produced PCBAs and box build products.

"We wanted a long-term partner, not just a supplier, capable of satisfying our stringent standards of flexibility, proactivity and quality. NOTE's specialist skills help us right through product lifecycles," commented Joakim Wiholm, Vice President of Global Operations at RaySafe.

RCO creates secure, safe and smooth lives

RCO Security AB develops, manufactures and sells entry and security system services and products. It offers its customers solutions extending from code locks for individual doors to major, integrated systems controlling entry and burglar alarms in nationwide real estate portfolios.

NOTE in Norrtälje, Sweden, has a close partnership with this customer, which originated in development projects and has evolved into full-scale batch production of the PCBAs integrated into entry systems. Component choices and price optimisation are discussed with designers and development teams. The emphasis in the prototyping phase is to create the best potential for cost-efficient manufacture. After products have been optimised, volume production begins in a fine-tuned process.

The manufacturing process is highly automated, enabling competitive production in Sweden.

"We selected NOTE because we need a highly flexible partner that can deal with multiple development projects while simultaneously ramping up high-volume batch production quickly. Closeness to plants, coupled with support for our development and manufacturing processes, are important. Additionally, production capability in countries where it is optimal for us from a total cost perspective were key factors for RCO," explains Mattias Annas, Head of Supply Chain & Quality at RCO.

Market and competitors

NOTE is active on the market for outsourced electronics manufacturing, which is evolving rapidly due to more widespread usage of electronics in society.

Background

Europe is unique in the global market for manufacturing services. Compared to the rest of the world, there is no other continent that has as many high-cost countries close to those with significantly lower cost levels. This has influenced the structure and evolution of the European market. Most market participants in Europe are domestic, smaller enterprises, often with histories with one or a few customers.

The global players that have started up in Europe primarily locate their operations in Eastern European countries. Several of them are significantly larger than NOTE, and operate in different segments, such as volume manufacture in sectors like automotive and consumer goods.

Generally, the value players located in Western Europe add for their customers can be regarded as more specialized services, while the value from those located in Eastern Europe is primarily driven by cost considerations. The market for outsourced electronics production has emerged and evolved as a consequence of customers' increasing focus on core business, more electronics content in various types of products, the growing demand for manufactured products and a way to cut costs and capital tied-up.

The market in 2017

The market for outsourced electronics manufacture progressed positively, notably in Europe. Progress was brisk on several of NOTE's domestic markets including Sweden, Finland and the UK. Continued high demand for electronics manufacture was apparent at the Estonian plant. The Chinese market remained at a high level.

Market trends, customer needs and future prospects

Globalisation and intensifying competition mean a growing focus on core business, which generally benefits businesses active in outsourcing. In recent years, the outsourcing market has undergone a major transformation. The primary drivers have been price pressure on components, more outsourcing, the relocation of production from high-cost to low-cost countries, demands for shorter lead-times from idea to finished product, and robust economic progress in growth regions, with the resulting emergence of new end-user markets.

Going forward, it's likely that important factors will remain the search for costefficient production, rationalisation, as well as continued production migration. Where previously, migration was mainly from West to East, in recent years, NOTE is witnessing greater interest in production close to end-customer markets, for sustainability and total cost considerations.

The results of NOTE's customer satisfaction surveys clearly demonstrate the significance of flexibility and closeness in customer partnerships. In addition, customers want more advanced technology to reduce lead-times from idea to finished product. The demand for tailored logistics solutions is also rising, to improve flexibility and reduce capital tied-up. The market for electronic production is forecast to grow by 4 to 5 percent per year over the coming five-year period.

Competitors

A few of NOTE's competitors active on the Nordic market are Enics, Kitron, Orbit One and Scanfil. There is also a range of regional and local players, often niche oriented, who address one or several of NOTE's markets.

Risk management

OPERATIVA RISKER OPERATIONAL RISKS OPERATIVA RISKER
RISK	EXPOSURE AND MANAGEMENT	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 30 largest in sales terms represented 67 percent of its sales in 2017. In most cases, NOTE manufactures a range of products for each customer. Usually, customers choose to place all their production of each product with the same supplier, so they can achieve economies of scale and limit material commitments and risks. Accordingly, NOTE's production volumes are closely linked to which products are	Sustainability risks Risk of shortcomings in occupational health and safety and corruption.	Certain materials are manufactured by suppliers or sub contractors in countries where there are risks of short comings in occupational health and safety and corrup tion. Accordingly, NOTE works actively on concentrating its sourcing of materials on suppliers with sustainable and responsible standpoints on these issues. NOTE communicates its Code of Conduct to suppliers continuously through audits, agreements and business related meetings.
Capacity risk	manufactured, and the lifecycle phase of customer's products. 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 by applying tried-and-tested processes. Overall, NOTE has good production capacity. Production	Environmental risks The risk that operations cause damage to the environment and costs for complying with new, more stringent environmental	Unlike many other sectors such as the heavy engineering and raw materials industries, NOTE's business has a fairly limited environmental impact. To comply with applicable environmental legislation, NOTE has essentially transferred to lead-free production.
The risk of not having sufficient production capacity.	is of a similar nature in several of the group's plants and NOTE can transfer production from one plant to another. However, sudden fluctuations in demand can cause capacity challenges in the group's plants.	directives. Liability Risks in addition to the above environmental	NOTE's role includes it being a collaborative partner to its customers, but not a product owner. Accordingly, materials selection and production are in accordance
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 issues.	risks where NOTE may be liable for payment due to commitments in its business.	with the customer's specification. Usually, the standards applying to NOTE's documentation of services rendered are extensive and can be considered complex. Quality monitoring of NOTE's production and strategic suppliers is a continuous process.
Inventories The risk of components and production materials not being consumed, and thus losing value.	NOTE has inventories corresponding to some 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, NOTE collaborates closely with customers to limit the risk of obsolescence in inventories.		NOTE's insurance cover 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.
Cyclical and seasonal	Obsolescence risk is monitored continuously. The market for outsourced electronics production is usually		FINANCIAL RISKS
variations	considered fairly cyclical. However, one important factor	RISK	EXPOSURE AND MANAGEMENT
	is that in principle, NOTE never conducts manufacture for capacity reasons to supplement customers' own production. Deterioration of the global economy, or a reduction in demand on NOTE's major markets would risk impacting NOTE's sales growth and earnings negatively. The business model is intended to achieve profitable growth combined with low investment and overheads.	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 plants 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
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 plants. Accordingly, NOTE can transfer production from one plant 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.	Financing The risk that refinancing loans is more difficult or costly, and that accordingly, NOTE's solvency is negatively affected.	forwards and similar instruments. NOTE needs external finance, primarily linked to the working capital of operations. Different sources of finance are continuously evaluated in close collaboration with NOTE's lenders. Funding costs and NOTE's prospects of re-financing are closely linked to market conditions and NOTE's profitability and cash flow.
		Customer credit The risk that a customer is unable to pay its debt to NOTE.	Overall, NOTE has a diversified customer base where no single customer represents more than 10 percent of sales. In terms of NOTE's business agreements, there are some individual customers that do create fairly high
Competence The risk of not possessing sufficient competence in all parts of the business.	NOTE provides sophisticated EMS which require high technical competence across several segments. NOTE endeavours for staff to achieve continuous competence development.		exposure in accounts receivable–trade and inventories, including outstanding purchase orders. Were these customers' solvency to deteriorate, this could have an adverse impact on NOTE's earnings. NOTE evaluates and credit checks new and existing customers.
IT IT-related disruptions can cause production downtime, loss of invoicing and/or reduced efficiency in administration and sales.	NOTE's operations require IT systems that work well. NOTE has a selection of local applications and operating environments with varying functionality and capacity. Following a far-reaching, group-wide project, a common business specific ERP system has been introduced at all of NOTE's Swedish plants. The ERP system came on stream at the Estonian plant in 2017. This is a key step in realising the ambition of further harmonising internal		Ongoing financial reporting includes close monitoring of accounts receivable–trade and inventories, including outstanding purchase orders.

processes and systems support group wide.

Sustainability

Sustainability issues are an important and integrated component of the business activities. NOTE works actively on issues affecting the environment, social conditions and its human resources, human rights and anti corruption. This work is conducted with the aid of applicable legislation, standards and other regulations.

Timeline of NOTE's sustainability work

1997	2002	2004	2006	2010	2011
The plant in Norrtälje, Sweden, ISO 14001 certification.	The plant in Torsby, Sweden, ISO 14001 certification.	The plant in Lund, Sweden, ISO 14001 certification.	Code of conduct produced.	The plants in UK and China ISO 14001 certification.	NOTE joins UN Global Compact.

Global Sustainable Development Goals

Global heads of state and governments adopted 17 Global Sustainable Development Goals at the UN summit on 25 September 2015. The links between these goals and NOTE's activities, targets and strategies are reported on the pages stated in the contents to the left.

Holistic view enhances business benefit

Working on an integrated footing on various sustainability issues is critical to effectiveness of overall results, and sustainability work involves all group companies. These questions include everything from appropriate conduct towards the company's stakeholders and helping customers choose components with good environmental and quality performance, to locating manufacture close to final markets, and limiting the environmental impact of transportation as far as possible.

Effective 2017, sustainability issues have been included in the annual survey sent to customers to identify the segments they regard as important to focus on. In tandem with improving its impact on the environment and wider society, NOTE endeavours to achieve responsible conduct on those markets where it operates.

NOTE's sustainability objective

The objective is to contribute to, and improve, the societies where NOTE

operates, by developing sustainable initiatives in our business. The group's shared values and policies are intended to lead, influence and direct the group's activities. NOTE complies with international standards and directives in the sustainability segment.

Environmental policy and working methods

NOTE endeavours to achieve long-term, sustainable development by producing with the minimum possible environmental impact. NOTE strives to comply with, or exceed, applicable environmental legislation, and pursues continuous improvement in the environmental segment.

NOTE's environmental work complies with international ISO guidelines, under the ISO 14000 family of standards. All the group's manufacturing units hold ISO 14001 environmental certification

and are audited by internal and external resources. NOTE was one of the earliest companies in the sector to receive its first ISO 14000 environmental certification, back in 1997.

Despite variations in the environmental legislation of individual countries, NOTE has the constant ambition of all its plants following a consistent line of environmental work. Plants exchange best practice, best-in-class actions and proposals for improvement.

Manufacturing units sort the waste from consumables at source, and monitor energy consumption continuously. NOTE also applies environmental consideration to other parts of its business, through channels including discussions with its customers regarding sourcing materials and production setups.

Electronic scrap, glass and paper are recycled. NOTE conducts improvement

2012

The plant in Finland ISO 14001 certification. The plant in Estonia receives sustainability award from the Estonian Chamber of Commerce & Industry.

2013

The plant in Estonia ISO 14001 certification. This means all NOTE's plants are ISO 14001 certified. OHSAS 18001 implemented at the plants in Estonia and China. Human rights and Anti corruption policies produced.

2014

For the fifth consecutive year, the plant in Estonia is awarded the Silver Sustainable Business Index Award by the Responsible Business Forum.

2015

The plant in Finland OHSAS 18001 certification.

2017

Equality policy produced. The plant in Norrtälje, Sweden, nominated for Samhall's Visa vägen ('Show the Way') award.

projects to reduce waste, energy consumption and CO2 emissions. Corrugated board and combustible waste are compacted to minimise the amount of waste transport, which affects the environment. In its transport, NOTE also coordinates its freight agreements group wide to optimise transportation, and thus limit energy consumption and CO2 emissions.

NOTE conducts regular environmental audits of strategic suppliers.

Gender division group

Division between blue collar and white collar workers

Social conditions and human resources

NOTE endeavours to be an employer where everyone has an equal opportunity to work and develop. The group's collective competence is based on diversity, which helps bring a dynamic and different perspectives to work.

NOTE is opposed to all forms of discrimination. One tool for working on this and other issues is its whistleblower function.

All NOTE employees are entitled to collective bargaining agreements, and to form and join trade unions. Collective bargaining agreements are in place at most of NOTE's plants. Three plants also use OHSAS 18001 to guide their work. This far-reaching, global and verifiable standard in occupational health and safety involves auditing and certification conducted by an external party.

NOTE updated and improved its policy work in 2017. This included the production and implementation of an Equality policy. NOTE in Torsby, Sweden, in partnership with the local employment service, arranged a soldering training in the year, with job applicants getting a good opportunity to work after completing a skills test.

The plant in Norrtälje, Sweden, was nominated for Samhall's Visa vägen ('Show the Way') award. The winner is the employer and enthusiast that has done most to show the way towards a more sustainable labour market, with more people with disabilities having a job.

The jury citation read: "You are breaking down outsidership, seeing the individual, and working for everyone to be treated equally."

The Award has been made since 2008. Jan Scherman, Chairman of the Visa vägen Jury commented on the nominees for 2017: "This year's nominees have really demonstrated that individuals and employers can make a difference.

By seeing possibilities and competences instead of difficulties and barriers, they are showing the way towards a labour market where more people find a place and fewer people are left out."

Respect for human rights and anti corruption

NOTE respects human rights and conducts itself to avoid breaches of them. In addition to the responsibility for its own operations, this also implies a responsibility for respecting human rights in business relations with the company's stakeholders. NOTE's Human rights policy has principles and standpoints that apply in labour law and equal opportunities.

NOTE's Code of Conduct formalises how the company expects its suppliers to conduct themselves within human rights, labour law, child labour, corruption and the environment. This is conveyed through the supply chain, and monitored in supplier audits.

NOTE's Anti corruption policy includes principles stating the group's standpoint on corruption. The policy also reviews segregation of duties, how internal controls are conducted, and stipulates a whistleblower procedure.

Consistent with previous years, and within the auspices of its internal control work, NOTE has a documented process for evaluating risk and compliance with policies. In 2018, the aim is to continue to reinforce policy work and encourage positive social progress in the locations where NOTE has a presence.

Full versions of NOTE's Code of Conduct, Human rights, Equality and Anti corruption policies are available at www.note.eu.

For more information on NOTE's business model and risk management, see the operational review on pages 8 and 13.

UN Global Compact

In 2011, NOTE became one of the first companies in its sector to join the Global Compact, which was started on a UN initiative.

The UN Global Compact's Ten Principles

The Global Compact has formulated ten principles affecting human rights, labour law, the environment and anti corruption. Member companies have undertaken to comply with these principles.

Each year, NOTE reports its COP (Communication on Progress) to the UN. This is a framework that defines how sustainability work is conducted within the group, and towards external stakeholders. The links to the UN's global sustainable development goals are one of the new features for the year.

NOTE's Code of Conduct is based on the Global Compact's ten principles and the full version is available on its website.

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. NOTE endeavours to develop business with companies that have the corresponding ethical rules on accountability.

RESULTS 2017

NOTE works actively and continuously to ensure compliance with its Code of Conduct.

In the year, NOTE encouraged existing and new customers and suppliers to join, or support, the UN Global Compact by communicating the significance of these issues. NOTE signed agreements with another four strategic and contracted suppliers (nine in 2016), who accepted NOTE's Code of Conduct or have their own, equivalent code.

NOTE conducted follow-up audits on 39 suppliers (12 in 2016) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact. The form used for supplier audits has been enhanced by adding more questions regarding human rights.

The share of sourcing from strategic and contracted suppliers increased from approximately 49 to approximately 55 percent (47 to 49 percent in 2016).

NOTE supported Doctors without Borders (MSF) in its work on giving people healthcare. This organisation treats vulnerable people affected by war, conflict or natural disaster. They currently conduct projects in over 70 countries.

GOALS 2018

Influence suppliers to accept NOTE's Code of Conduct and encourage customers and suppliers to join the UN Global Compact, or support its ten principles. Continuously follow up on NOTE's Code of Conduct

and the ten principles of the UN Global Compact in supplier audits.

Increase the share of sourcing from strategic and contracted suppliers by three percentage points. Work to help children and uphold their rights, by

supporting development organisations.

PRINCIPLE 2: BUSINESSES SHOULD ENSURE THAT THEY ARE NOT COMPLICIT IN HUMAN RIGHTS ABUSES

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. NOTE's Human rights policy has been implemented in all plants' business systems.

RESULTS 2017

NOTE works actively and continuously to ensure compliance with its Code of Conduct internally. Internal audits were conducted to ensure compliance with relevant policies, laws and ordinances.

In the year, NOTE continued to work actively to reduce the usage of conflict minerals by helping customers select materials, to avoid this type of material.

GOALS 2018

Continue to promote human rights internally and towards the company's stakeholders.

FREEDOM OF ASSOCIATION AND THE EFFECTIVE RECOGNITION OF THE RIGHTS TO COLLECTIVE BARGAINING

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. All NOTE employees are entitled to collective

bargaining, and to form, and join, trade unions. Collective bargaining agreements are in place at the majority of NOTE's plants.

NOTE's Human rights policy states the group's internal standpoints on this principle.

Three plants also use OHSAS 18001 as guidance for their work. This is a far-reaching, global and verifiable standard in occupational health and safety, with auditing and certification conducted by an external party.

RESULTS 2017

NOTE works actively and continuously to ensure compliance with its Code of Conduct. In the year, NOTE encouraged existing and new customers and suppliers to join, or support, the UN Global Compact by communicating the significance of these issues.

NOTE signed agreements with another four strategic or contracted suppliers (nine in 2016), who accepted NOTE's Code of Conduct or have their own, equivalent code.

NOTE conducted follow-up audits on 39 suppliers (12 in 2016) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact. The results of audits indicate that suppliers are complying with relevant laws and regulations.

The share of sourcing from strategic and contracted suppliers increased from approximately 49 to approximately 55 percent (47 to 49 percent in 2016).

In the year, NOTE continued its work on reducing the usage of conflict minerals.

GOALS 2018

Influence suppliers to accept NOTE's Code of Conduct, and encourage customers and suppliers to join the UN Global Compact, or support its ten principles.

Continuously follow up on NOTE's Code of Conduct and the ten principles of the UN Global Compact in supplier audits.

Increase the share of sourcing from strategic and contracted suppliers by three percentage points.

PRINCIPLE 4: BUSINESSES SHOULD UPHOLD THE ELIMINATION OF ALL FORMS OF FORCED AND COMPULSORY LABOUR

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006.

As part of its business principles, NOTE and its customers' and suppliers' employees should enter employment and contracts of their own free will.

NOTE's Human rights policy stipulates that employment with the company should always be voluntary. Additionally, work should always be conducted without compulsion or harassment, either physical or psychological.

RESULTS 2017 AND GOALS 2018

See principle 3.

PRINCIPLE 5: BUSINESSES SHOULD UPHOLD THE EFFECTIVE PROHIBITION OF CHILD LABOUR

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006.

NOTE complies with relevant laws and ordnances on child labour. NOTE does not employ children and does not collaborate with companies that use children as part of their workforce.

The group's standpoints on this principle are stated in NOTE's Human rights policy.

RESULTS 2017 AND GOALS 2018 See principle 3.

PRINCIPLE 6: BUSINESSES SHOULD UPHOLD THE ELIMINATION OF DISCRIMINATION IN RESPECT OF EMPLOYMENT AND OCCUPATION

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. NOTE believes in a workplace where all employees have equal opportunities to work and progress. 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 Equality policy states the company's principles governing equal opportunities and diversity, which are encouraged in all parts of its business. The company endeavours to achieve equal opportunities in terms of employment and working conditions, as well as developmental opportunities. The company pursues diversity on recruitment. Its working sentiment should feature respect and tolerance. If any instances of harassment or bullying are reported, the group will take action immediately.

RESULTS 2017

NOTE conducted a group-wide employee satisfaction survey in the year. Based on responses, NOTE has formulated plans with clear activities and a schedule for execution. The results are also utilised in NOTE's future planning and development work.

NOTE produced and implemented an Equality policy in the year.

NOTE works actively and continuously to ensure compliance with its Code of Conduct.

In the year, NOTE encouraged existing and new customers and suppliers to join, or support, the UN Global Compact by communicating the significance of these issues.

NOTE signed agreements with another four strategic or contracted suppliers (nine in 2016), who accepted NOTE's Code of Conduct or have their own, equivalent code. Follow-up audits were conducted on 39 suppliers (12 in 2016) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact. The results of audits indicate that suppliers are complying with relevant laws and regulations.

The share of sourcing from strategic and contracted suppliers increased from approximately 49 to 55 percent (47 to 49 percent in 2016).

GOALS 2018

Conduct a group-wide employee satisfaction survey and use its results in business processes.

Influence suppliers to accept NOTE's Code of Conduct and encourage customers and suppliers to join the UN Global Compact, or support its ten principles.

Continuously follow up on NOTE's Code of Conduct and the ten principles of the UN Global Compact in supplier audits.

Increase the share of sourcing from strategic and contracted suppliers by three percentage points.

A PRECAUTIONARY APPROACH TO ENVIRONMENTAL CHALLENGES

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. All NOTE's manufacturing units hold ISO 14001

certification and undergo internal and external audits. NOTE's plants run improvement projects in the environmental segment, and measure a series of

environmental factors such as electronic scrap, energy consumption and transport. All plants have environmental targets, which are monitored regularly.

NOTE is endeavouring to increase the share of sourcing from strategic and contracted suppliers. NOTE has a good understanding of these suppliers' environmental work, and can help them to evolve and improve in this segment.

RESULTS 2017

NOTE works actively and continuously to ensure compliance with its Code of Conduct.

NOTE's plants work on the basis of individual targets and circumstances in the environmental segment. A variety of initiatives are ongoing, including work lights that have been wholly or partly replaced with LED equivalents in the manufacturing units in Finland, the UK and Estonia, to save energy. Timers have been installed at certain plants to ensure lighting is not used unnecessarily.

Like many other plants in the group, the UK manufacturing unit has invested in a selective soldering machine. This has reduced tin slag, enabling a more environmentally friendly process than previously.

Additional fume cupboards have been sourced for the plants in Estonia and Torsby, Sweden, helping create a better, safer working environment.

The plant in Estonia has reviewed its ventilation and air humidity, sourcing new equipment. An investment has also been made in a separate storage facility for chemicals, to make processing safer.

The plant in Estonia also joined FOKA, whose primary purpose is to reduce emissions of prevalent greenhouse gases and ozone-depleting compounds.

Internal programs in waste sorting were conducted in the year, with improvements to waste sorting executed.

Coordination of return freight has been organised, enabling some freighting to reduce from once per week to once per month.

A REACH-EU regulation policy was prepared in the year, stipulating how NOTE works to comply with this EU regulation for handling chemicals. The complete policy is available at the website.

NOTE encouraged existing and new customers and suppliers to join, or support, the UN Global Compact by communicating the significance of these issues.

NOTE signed agreements with another four strategic and contracted suppliers (nine in 2016), who accepted NOTE's Code of Conduct or have their own, equivalent code.

Follow-up audits were conducted on 39 suppliers (12 in 2016) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact. The results of these audits demonstrate their suppliers

are complying with relevant laws and ordinances.

The share of purchasing from strategic and contracted suppliers increased from approximately 49 to approximately 55 percent (47 to 49 percent in 2016).

GOALS 2018

Continued progress towards still more environmentally friendly production and environmental transportation. Continue to reduce waste volumes.

Influence suppliers to accept NOTE's Code of Conduct and encourage customers and suppliers to join the UN Global Compact, or support its ten principles.

Continuously follow up on NOTE's Code of Conduct and the ten principles of the UN Global Compact in supplier audits.

Increase the share of sourcing from strategic and contracted suppliers by three percentage points.

PRINCIPLE 8: UNDERTAKE INITIATIVES TO PROMOTE GREATER ENVIRONMENTAL RESPONSIBILITY

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. All NOTE's plants hold ISO 14001 certification and

undergo internal and external audits.

The group works actively on developing guidelines and methodologies designed to minimise the group's negative environmental impact. Employees are encouraged to participate in this process.

NOTE is endeavouring to increase the share of sourcing from strategic and contracted suppliers. NOTE has a good understanding of these suppliers' environmental work and can help them to evolve and improve in this segment.

RESULTS 2017 AND GOALS 2018 See principle 7.

PRINCIPLE 9: ENCOURAGE THE DEVELOPMENT AND DIFFUSION OF ENVIRONMENTALLY FRIENDLY TECHNOLOGY

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006. All NOTE's plants hold ISO 14001 certification.

NOTE takes a positive view of developing environmental technology and actively supports new manufacturing methods and components that are more environmentally friendly. NOTE conducts environmental audits when introducing new equipment, technology and logistics solutions. Experience is shared between the group's plants.

An environmental perspective is considered jointly with customers when tailoring product manufacture. NOTE has implemented a database for identifying RoHS, Reach and conflict minerals in components.

RESULTS 2017 AND GOALS 2018 See principle 7.

APPROACH

NOTE has been using its Code of Conduct, which supports the ten principles of the UN Global Compact, since 2006.

NOTE has an anti corruption policy, including a whistleblower procedure, which has been implemented in all plants' business systems.

NOTE encourages employees to resolutely counter all forms of corruption, extortion and bribery. Simultaneously, NOTE expects the corresponding attitudes from its customers and suppliers. NOTE does not accept any gifts, whether to customers or from suppliers, other than items of lesser value.

NOTE's Purchasing policy includes the prohibition of bribery and corruption, with sourcing managed according to ethical rules.

NOTE has group-wide and local authorisation procedures expedient for its business.

RESULTS 2017

NOTE works actively and continuously to ensure compliance with its Code of Conduct.

NOTE continued to enhance its internal control processes in the year. NOTE conducted internal follow-ups and audits of its Anti corruption policy, and verified that its authorisation processes are functioning. No observations were made in these audits.

No instances of suspected corruption were reported through the whistleblower procedure.

In the year, NOTE encouraged existing and new customers and suppliers to join, or support, the UN Global Compact by communicating the significance of these issues.

NOTE signed agreements with another four strategic and contracted suppliers (nine in 2016), who accepted NOTE's Code of Conduct or have their own, equivalent code.

Follow-up audits were conducted on 39 suppliers (12 in 2016) that had previously accepted NOTE's Code of

Conduct and the ten principles of the UN Global Compact. The results of these audits demonstrate their suppliers are complying with relevant anti corruption laws and ordinances.

The share of purchasing from strategic and contracted suppliers increased from approximately 49 to approximately 55 percent (47 to 49 percent in 2016).

GOALS 2018

Influence suppliers to accept NOTE's Code of Conduct and encourage customers and suppliers to join the UN Global Compact, or support its ten principles.

Continuously follow up on NOTE's Code of Conduct and the ten principles of the UN Global Compact in supplier audits.

Increase the share of sourcing from strategic and contracted suppliers by three percentage points.

SHARE OF SOURCING FROM STRATEGIC SUPPLIERS

We reinforced our work on sustainability issues in 2017, and are noticing how interest in these issues, primarily in the environment, is increasing among our customers. We're proud of our work on the UN Global Compact and are attempting to influence our business environment positively.

Per Ovrén, CEO & President

Human resources

NOTE's business is built on solving customers' complex problems every day. Apart from robust, industrial processes, it's the employees—with their ingenuity, commitment and drive to help customers—who create the strength of the organisation.

NOTE possesses a global organisation with operations in Sweden, Finland, the UK, Estonia and China. One of its key missions is to develop the interaction between plants. This work is done through channels including a number of functional forums, in segments including quality, sourcing, accounting and sales. NOTE works continuously on harmonising its working methods and monitoring tools, as well as clarifying guidelines. Its improvement and development processes involve many employees group wide. NOTE continuously monitors business-related key performance indicators such as ongoing central and local improvement projects.

The workforce was upsized and downsized in the year to cope with demand fluctuations and to implement rationalisation. Overall, the workforce decreased by 64 employees. Staff turnover was 16 percent in the group overall, of which 9 percent was in the European plants.

Training

To assure quality and competence in the electronics assembly process, several NOTE plants maintain long-term collaborations with external partners in soldering and electronics assembly training. Usually, these packages involve practical work and the certification of qualified electronic assemblers.

Several NOTE plants offer opportunities for University and college students to write their masters' dissertations.

Employee of the Month

Achieving the goal of being the best collaboration partner in the sector, with leading delivery precision and quality for a competitive overall cost, demands a lot from everyone involved. To recognise the people that have contributed something really special, NOTE has an Employee of the Month award. This might be someone who has 'gone the extra mile,' or been a great ambassador for NOTE.

One further ambition of this award is to make an extra contribution to a greater feeling of solidarity within the group and

Andreas Antonsson

NOTE is investing in new technology, which makes Andreas's work easier and enables him to develop. Andreas is a machine operator, focusing on thru-hole mounting, and has been working at NOTE in Torsby, Sweden, since 2007.

"I've really developed in my time here. Before starting at NOTE, I didn't know much about the electronics sector or machine processing before, but I do now," Andreas explains.

His duties involve everything involving selective soldering processes such as maintenance, programming and operating the machine.

"The problem-solving that can occur in a machine process is what I like most about my job, primarily because I can use creativity to find solutions and run specific products," he concludes.

share real examples of how the employees conduct themselves when they perform at their best, towards customers or colleagues, for example.

A winner is selected each year, and in 2017, the Employee of the Year was Tia Mellberg from Finland. Meet Tia, and some of the other monthly winners, below.

Katarina Gunnarsson

As the HR Manager of NOTE in Norrtälje, Sweden, Katarina's duties are very varied. She runs payroll for several group companies, and has also had a lot of input in the health and safety work at the plant. She views dialogue with her colleagues as one of the most enjoyable parts of her work, because it brings new knowledge every day and is an important source of her personal development.

"My colleagues are a big contributor to my job satisfaction, but also help make my work so varied. No two days are ever alike," she explains.

She thinks that sharing so much with her colleagues has its ups and downs, and on occasion, can be a little scary. But overall, she thinks it's positive. In her 22 years with the company, Katarina has tried a lot of different duties, and enjoys her current position best.

Katarina adds: "I also like the fact that there's no self-importance here. That's helped create strong solidarity, which I think is a big success factor."

Employee satisfaction survey

The employee satisfaction survey of the year was redesigned to give a clearer view of leadership, and an insight into how operations are working day to day. It's important that every employee feels that they can deliver value-added to customers, understanding how to achieve this, and why. NOTE created a plan of clear

activities, with a schedule for execution, based on responses. The outcome is being analysed and utilised in NOTE's future planning and development work.

For more information on human resources, refer to page 40 of the formal annual accounts.

Average number of employees by country

Tia Mellberg

Everything started with a summer job at NOTE in Hyvinkää, Finland, which Tia really enjoyed. Now, eight years later, she's still there.

"NOTE listens to its people and there's flexibility between employer and employee. We've got a great working environment and the people who work here are fantastic," she says.

Tia's job has changed over the years. Where previously, she worked mostly on incoming freight, she now works as an operator in surface mounting, mounting components. She has sharpened her skills on the surface mounting machine, which is one of the things she values most highly at work. Her varied base of experience has also helped Tia understand each product's journey before it comes to the customer, because she knows the stages, and has started to understand the process.

"I'm always learning new things and am improving my work. I also like the high tempo and variation in duties, such as working on different types of machines," she explains.

Forrest Qin

Current and new business customers are still interested in working with NOTE, and Forrest Qin is one of the reasons for this success. Forrest has been a Project Manager at NOTE's plant in China for three years, focusing on current business customers' growth.

"We try to satisfy customer needs, and adapt our solutions optimally," explains Forrest. It's a difficult balance to strike, but Forrest is flexible and takes on new challenges positively.

Forrest has really developed during his time at NOTE, which is very much due to his colleagues. The collaboration between plants, and his own input, has helped him grow into his professional role.

"NOTE is always striving to get better. I get room to develop, and I've also got a lot of friends here. They're like my family," concludes Forrest.

Average number of employees

912

Auditor's report on the statutory sustainability report

To the general meeting of shareholders of NOTE AB (publ) Corporate identity number 556408-8770

Assignment and segregation of duties

The Board of Directors is responsible for the statutory sustainability report for 2017 on pages 14–21, and that it is prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our examination has been conducted in accordance with FAR's statement RevR 12 The auditor's opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinion.

Niklas Renström Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 3 April 2018

Opinions

A statutory sustainability report has been prepared.

Discrepancies between reports

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.

Share data and shareholders

NOTE's share price increased by 43 percent in the year, and the number of shareholders increased by 25 percent.

Share price performance

NOTE's share price increased by 43 percent in the year to a closing price of SEK 24.30 (17.00). The high in the year was SEK 30.50, on 15 November. The low of the year of SEK 16.20 was on 2 January. The stock exchange OMX Stockholm Small Cap PI index increased by six percent in the year.

At the end of the year, NOTE's market capitalisation was SEK 702 (491) million. The number of shareholders increased by 25 percent in 2017, to 4,379 (3,517) at year-end.

Turnover

19,310,188 NOTE shares were traded on the Stockholm Stock Exchange in 2017, corresponding to a rate of turnover of 64 percent. An average of 76,933 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 a dividend of SEK 1.00 (0.70) per share, corresponding to SEK 28.9 million, is paid to shareholders for the financial year 2017.

Trading

Listing:	Nasdaq Stockholm
Segment:	Small Cap
Sector:	Industrial Goods & Services
Ticker symbol:	NOTE
ISIN code:	SE0001161654
No. of shares as of
31 December 2017:	28,872,600

10 largest shareholders as of 31 December 2017, by holding

Name		No. of shares Proportion of capital/votes, %
Creades AB	7,610,915	26.36
Johan Hagberg	4,593,184	15.91
Catella fondförvaltning	2,602,382	9.01
Kjell-Åke Andersson with family	1,049,353	3.63
Avanza Pension	748,611	2.59
FCG Fonder	605,000	2.10
Myggenäs Gård AB	596,659	2.07
Stefan Bozzao	510,000	1.77
Fredrik Hagberg	445,548	1.54
Mediuminvest A/S	395,598	1.37
Total	19,157,250	66.35

Division by size, holdings by shareholder as of 31 December 2017

Size of holding	No. of shareholders		No. of shares Proportion of capital/votes, %
1–500	2,666	421,424	1.46
501–2,000	1,048	1,192,034	4.13
2,001–5,000	358	1,223,386	4.24
5,001–20,000	217	2,111,553	7.31
20,001–50,000	53	1,802,664	6.24
50,001–500,000	29	4,859,788	16.83
500,001–5,000,000	8	17,261,751	59.79
Total	4,379	28,872,600	100.0

Incentive programme

From its own holdings, NOTE's largest shareholder Creades AB issued call options to senior managers during the first quarter. These call options related to some two percent of the total number of outstanding NOTE shares. Exercise was during the fourth quarter, when senior managers acquired a total of 196,000 shares, or 0.7 percent of the total number of outstanding NOTE shares. NOTE's Annual General Meeting (AGM) resolved to introduce a long-term

incentive programme (three years) for senior managers and key individuals. The incentive program involved the issue of 600,000 share warrants, corresponding to approximately two percent of the number of outstanding NOTE shares.

The pricing of the incentive programmes was on market terms, and both programmes were fully subscribed.

Share price 2013–2017

Share capital history

		Increase in	Increase in share	Total no.	Total share	Quotient value
Year	Transaction	no. of shares	capital (SEK)	of shares	capital (SEK)	(SEK)
1999	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

Corporate Governance Report

Introduction

The regulatory structure for governing and controlling NOTE primarily consists of the Swedish Companies Act, applicable regulations for listed companies, the Swedish Code of Corporate Governance (the Code), International Financial Reporting Standards (IFRS), as well as internal guidelines.

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 stipulate items including the company's registered office, operations, the amount of share capital, the number of shares and how the AGM is convened.

The Articles of Association also state items including the Board of Directors consisting of a minimum of three and a maximum of ten ordinary members. The Directors 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 meetings.

Shareholders

At the end of 2017, NOTE had two shareholders representing more than 10 percent of the shares of the company

Laws and practice

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

The Swedish Corporate Governance Board, www.bolagsstyrning.se, where the Swedish Code of Corporate Governance is stated.
NASDAQ Stockholm, www.nasdaqomx. com, which states the rules for issuers.

The Swedish Financial Supervisory Authority, www.fi.se, which states Authority's statutes and information on insiders.

each. Creades AB represented 26.4 percent and Johan Hagberg represented 15.9 percent.

For more information on the share and shareholders, see the NOTE share on pages 24–25.

Shareholders' meetings

Shareholders' meetings are 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 duly notified the company of their participation, 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 the minutes of the Meeting is published on the website. NOTE's AGM will be held in 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 Directors and CEO from liability, electing Directors, the Chairman of the Board and Auditors, and approving the guidelines for remunerating senior management and fees for the Board of Directors and Auditors.

Extraordinary General Meeting 2017

Changes to NOTE's ownership in December 2016 also resulted in changes to its Board of Directors. An Extraordinary General Meeting (EGM) was held on

20 January, which re-elected Kjell-Åke Andersson and Bahare Hederstierna, and elected Johan Hagberg, John Hedberg, and Per Ovrén as Directors for the period until the next Annual General Meeting (AGM). John Hedberg was elected Chairman of the Board.

Annual General Meeting 2017

NOTE's AGM was held on 20 April 2017 at Spårvagnshallarna in Stockholm, Sweden. Shareholders representing a total of 52.5 percent of the capital and votes attended the Meeting. The Meeting resolved on matters including re-electing Kjell-Åke Andersson, Johan Hagberg, John Hedberg, Bahare Hederstierna and Per Ovrén, and electing Mikael Norin, as Directors for the period until the next Annual General Meeting is held. John Hedberg was elected Chairman. The AGM approved fees in accordance with the Nomination Committee's proposal.

The Meeting also resolved to introduce an incentive programme for group management and key staff, based on a private placement of a maximum of 600,000 share warrants, and running until May 2020.

The Meeting approved the Board's proposal of a dividend to shareholders of SEK 0.70 per share and authorised the Board to decide on the purchase and transfer of treasury shares.

Nomination Committee

The AGM resolves on how the Nomination Committee is appointed. The AGM 2017 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

Nomination Committee members for the AGM 2018

Committee member	Share of capital/votes, % 31 Dec 2017
Fredrik Hagberg, Myggenäs Gård AB	2.1
Johan Hagberg, personal holdings	15.9
Jonas Hagströmer, Creades AB	26.4
Martin Nilsson, Catella Fondförvaltning	9.0

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 Directors.
Directors' fees for the Chairman, other Directors and remuneration for Committee work.
Election and remuneration of the external Auditor.
Decision on principles of composition of the Nomination Committee for the next AGM.

As part of its work, for the AGM 2018, the Nomination Committee has considered the appraisal of the work of the Board in the year. Proposals for new Directors have been prepared, which also consider NOTE's Diversity Policy.

The Nomination Committee reached the following conclusions in its reasoned statement for the AGM 2018: Considering the company's operations, developmental phase and other circumstances, the Board of Directors has an expedient composition featuring diversity and breadth in terms of Directors' competence, experience and background. The Board of Directors of NOTE does not have an even gender balance, because the proposed members consist of one woman and four men (20 and 80 percent respectively). Accordingly, the Nomination Committee's proposal for the Board of Directors does not satisfy the Code's

requirement of an even gender balance on the Board of Directors, but the Nomination Committee takes this matter seriously, and is endeavouring to achieve a more even balance going forward. The Nomination Committee's proposed Directors, Directors' fees and election of Auditors will be presented in the convening notice for the AGM.

A report on the work of the Nomination Committee will be presented at the AGM 2018. No special remuneration was paid to the members of the Nomination Committee.

Diversity Policy

NOTE's Diversity Policy is adopted by the Board of Directors. The Chairman of the Board is responsible for communicating the Policy to the Nomination Committee, which applies it for appointing Directors. The overall purpose is to identify Directors with the right competence and experience to manage NOTE's strategy work responsibly and successfully. Diversity in terms of age, gender, geographical origin, education and professional background are also considered.

No Director should be subject to discrimination based on ethnic background, religion, physical or psychological disability, age, gender, sexual orientation or for any other reason.

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

Director	Position	Board meetings	Remuneration Committee	Audit Committee	Director's fee, SEK*	Committee fee, SEK*
John Hedberg (since 20 January 2017)	Chairman	6/6	2/2	3/3	250,000	–
Kjell-Åke Andersson	Director	6/6	2/2	3/3	110,000	60,000
Johan Hagberg (since 20 January 2017) Director		6/6	2/2	–	110,000	–
Bahare Hederstierna	Director	6/6	2/2	–	110,000	–
Mikael Norin (since 20 April 2017)	Director	4/6	2/2	–	110,000	–
Per Ovrén (since 20 January 2017)	Director	6/6	2/2	–	110,000	–
Christoffer Skogh (since 30 June 2017)	Employee representative, member	2/6	1/2	–	–	–
Johan Lantz (since 30 June 2017)	Employee representative, deputy	2/6	1/2	–	–	–

Board of Directors 2017–attendance and remuneration Attendance statistics

*Fee for full term of office, approved by AGM.

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, as well as 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.

The Chairman is also responsible for the yearly appraisal of the work of the Board, which is conducted through a survey provided to all Directors. The results are compiled and discussed by the Board.

The Chairman is also responsible for providing the Nomination Committee with access to the appraisal.

Changes in the composition of the Board of Directors were made in January 2017 due to changes to NOTE's ownership. At that time, the Board consisted of five members elected by the Annual General Meeting and two employee representatives, one being a deputy. The AGM in April elected one more Director to the Board.

The Board of Directors has a general composition of sector knowledge and competence from Board work and management of listed companies as well as financing, accounting, structural change and sales, and strategic sourcing.

Board work in 2017

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, sales and marketing, financing, budget and long-term operational planning.

The Board of Directors endeavours for NOTE to be an employer where all staff get an equal opportunity to work and develop. Employees' specific competences should also be valued, regardless of gender, ethnicity, sexual orientation, disability, age or social background. The Board of Directors encourages the integration of equal opportunities and diversity into all aspects of operations.

The Board of Directors held six 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 independently. Reporting to the Board on issues considered at Audit Committee meetings is either in writing or orally at the following Board meeting. In the financial year, the Audit Committee members were John Hedberg and Kjell-Åke Andersson.

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 maintains a close and regular collaboration with the group's finance function regarding internal and external reporting of financial information. There is also a collaboration developed on matters of internal control, selection and appraisal of auditing principles and models.

In the financial year 2017, the Audit Committee monitored compliance with the adopted guidelines and held three meetings with the company's Auditors, to discuss audit issues and internal controls. The Auditors' written reports were distributed to the Board of Directors 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.

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 Board of Directors in 2017. 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 programs 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.

Specifying the profitability-based, variable remuneration program for group management, subsidiary Presidents and other key individuals, which ran during 2017.

After an evaluation, the Remuneration Committee concluded that:

NOTE is following the guidelines for remunerating senior management that the AGM 2017 resolved on.
Applicable remuneration structures and levels are reasonable against the background of the company's operations.
Compensation from the profitability-based, variable remuneration program that ran during 2017 for group management, subsidiary Presidents and other key individuals amounted to SEK 4.8 million excluding social security contributions.

Guidelines for remuneration and other benefits for senior management

For information on these guidelines, refer to the formal annual accounts on page 39. For information on remuneration and other benefits, see Note 8, Employees, personnel expenses and remuneration to senior management, on page 52.

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 Auditor in Charge also presents an Audit Report to the AGM. The AGM 2017 re-elected Öhrlings PricewaterhouseCoopers AB as audit firm, with Niklas Renström as Auditor in Charge until the AGM 2018.

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 of how operations are progressing based on the decisions they have taken. Written instructions define the segregation of duties between the Board of Directors and the CEO.

Group management

NOTE's group management is responsible for various parts of operations. This responsibility includes the preparation and execution of the group's overall strategies. During the financial year, group management held regular meetings to review results of operations, the conditions of operations and strategic and operational issues.

Governance of subsidiaries

Subsidiaries' operations are followed up monthly in terms of a number of operational targets, financial targets and key indicators.

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 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 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, NOTE 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.

Guidelines and limits relating to risk assessments are updated at least yearly. For more information on risks and risk management, see Operations on page 13 and Note 24, Financial risks and finance policy on page 57–58.

Monitoring control activities

The monitoring of NOTE's units is undergoing continuous progress. The units' financial and operational progress is followed closely in various forums. Matters that are addressed include financial 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 finance function.

Auditor's report on the Corporate Governance Statement

To the general meeting of shareholders of NOTE AB (publ), corporate ID no. 556408-8770

Assignment and segregation of duties

The Board of Directors is responsible for that the corporate governance statement for 2017 on pages 26–31 has been prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our examination of the corporate governance statement is conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.

Niklas Renström Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 3 April 2018

Opinions

A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 § 6 the second paragraph points 2–6 of the Annual Accounts Act and chapter 7 § 31 the second paragraph the same law are consistent with the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.

Discrepancies between reports

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.

Group management

	PER OVRÉN	DAVID KRANTZ	HENRIK NYGREN	ROBERT ROSENZWEIG	FREDRIK SCHULTZ
Position	Chief Executive Officer	Chief Procurement Officer	Chief Financial Officer	Chief Operating Officer	Chief Sales Officer
Employed	2017	2017	2006	2010	2015
Born	1977	1980	1956	1967	1972
Education	M.Sc. (Eng.)	M.Sc. (Eng.) in communications and transport systems.	M.Sc. (Eng.) in industrial engineering and management.	International Business Economics.	Graduate of the Swedish Air Force Officer Training School, political econo mics qualifications.
Other significant assignments	None.	None.	None.	None.	None.
Professional experience	Many years broad based experience of line positions, investment and strategic consulting within Bilia AB, Investment AB Öresund, Johnson Pump and Bain & Company.	Long-term experience of procurement and supply chains in operational and executive positions with companies including Ericsson.	CFO and business controller of major listed Swedish and international industrial groups such as SSAB, Danaher Corporation and Snap-on Incorporated. Previous experience of business development and trade sales for companies including Retriva AB.	Business Developer with Nobia AB, COO of Johnson Pump AB and other senior positions with Alfa Laval.	Many years' experi ence of the EMS sector from senior positions in supply chain, sourcing and sales in multinational groups such as Flextronics and Enics.
NOTE shareholdings*	97,200 shares.	0 shares.	100,000 shares.	91,692 shares.	50,000 shares.
NOTE option holdings	100,000 options.	100,000 options.	100,000 options.	100,000 options.	100,000 options.

*Including holdings by related persons or legal entities.

Board of Directors

JOHN HEDBERG JOHAN HAGBERG KJELL-ÅKE ANDERSSON BAHARE HEDERSTIERNA

Director 2015 1981

Position	Chairman	Director	Director	Director
Elected	2017	2010	2017	2015
Born	1972	1946	1971	1981
Education	M.Sc. (Econ.).	M.Sc. (Eng.).	Political economist and mathematician.	M.A. (Econ.).
Main occupation	CEO of Creades AB.	Directorships and consulting in corporate management.	Professional investor.	Category Manager of Knorr Bremse GmbH.
Other directorships	Director of Acne Studios AB, Lindab AB and LOTS Group AB.	Chairman of the Board of Cervitrol AB, Domitech AB and MedicPen AB. Director of Mekatronik Konsult i Lund AB.	None.	None.
Professional experience	Former Partner of Nordic Capital, and prior to that, CEO of Relacom AB, Procurement & Business Development Director of Bonnier newspapers and management consultant at McKinsey & Co.	Over 40 years' experience in industry, about 30 years in the EMS sector. Various positions includ ing development engineer, production manager and CEO of companies includ ing Electrolux and NOTE.	Former mathematics teacher, entrepreneur and active in the entertain ment industry, as well as cultural producer active within regional adult education provider ABF Stockholm.	Ten years within purchasing and supply chain in the automotive industry. Broad experi ence of various positions at Volvo Cars and Volvo Trucks, most recently as Strategic Purchasing Manager for electronics at Volvo Trucks.
NOTE shareholdings*	0 shares.	1,032,000 shares.	4,593,184 shares.	5,000 shares.

Non-affiliated to company and management	Yes.	Yes.	Yes.	Yes.
Non-affiliated to major shareholders	No, CEO of Creades AB, which holds >10 percent	Yes.	No, holds >10 percent of NOTE's shares.	Yes.

*As of 28 Feb 2018, including holdings by related persons or legal entities.

of NOTE's shares.

Senior high school engineering graduate, M.Sc. (Econ.). CEO of Cavotec SA.

Chairman of Quant AB.

Most recently, Divisional Manager of Rolls-Royce. Former Divisional Manager of Brambles and Business Area Manager

of ABB.

0 shares.

Yes.

Director

2017 1963

Director

2017 1977 M.Sc. (Eng.).

None.

Yes.

MIKAEL NORIN PER OVRÉN CHRISTOFFER SKOGH JOHAN LANTZ

Employee representative, Board member 2017 1975 Senior high school graduate, social sciences programme. Business Development Manager of NOTE. None. Former employee representative of NOTE from 2009–2014. Ten years' experience as an Account Manager. Broad-based experience of several functions including manufacturing, supplier development and strategic procurement. 100 aktier. Employee representative, Board member 2017 1972 M.Sc. (Econ.). Business Development Manager of NOTE. None. Sales experience in various roles. 0 shares. President & CEO of NOTE. Many years broadbased experience of line positions, investment and strategic consulting

within Bilia AB, Investment AB Öresund, Johnson Pump and Bain & Company.

Yes.

97,200 shares.	100 aktier.

Yes.	Yes.

Yes.

Formal Annual Accounts

FORMAL ANNUAL ACCOUNTS

Report of the Directors	37
Five-year summary	41
Consolidated Financial Statements	44
Notes on the Consolidated Financial Statements	48
Parent Company's Financial Statements	60
Notes on the Parent Company's Financial Statements	64
Auditor's report	69

Report of the Directors

OPERATIONS–GENERAL

NOTE is one of northern Europe's leading EMS partners. Its market positioning is especially strong in the high mix market segment, i.e. products that require a high level of technological competence and flexibility. NOTE produces PCBAs, subassemblies and box build products. NOTE's offering covers the complete product lifecycle, from design to after-sales.

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

OPERATIONS IN 2017

NOTE is one of the Nordic market's strongest electronics manufacturers, and a stable business partner for Swedish and international customers that need high end electronics production.

2017 was a good year for NOTE, when we advanced positioning in several market segments. The positive progress of the business cycle, notably in Western Europe, was an additional contributor to the positive demand for NOTE's services and solutions. NOTE increased sales by 7 percent to SEK 1,175.7 million. Adjusted for the Norwegian operation, which was divested in 2016, growth in current units was 9 percent. In the fourth quarter, NOTE achieved growth of 13 percent. At yearend, NOTE's order books were up by over 20 percent year on year, suggesting further positive progress in the short term. NOTE is now at a growth level that puts it among the sector's highest-growth companies.

NOTE endeavours to secure long-term customer relations and partnerships. Its customer base is diversified, and the group already partners with several of the leading corporations in the Nordics across a broad spectrum of industries. NOTE sees good growth potential in deepening partnerships with current business customers, in the industrial and communications sectors, as well as in the medtech and defence industries.

NOTE has also been working to expand its customer base for some time, adding new customers and projects. Examples include the collaborations previously reported with Saab, myFC, and most recently CellMark, a company active in medtech. The leadtime from the prototyping stage to batch production varies in new projects. It can be just a few months, but often takes longer. At present, over 20 percent of NOTE's sales consist of partnerships with new customers that have been secured in recent years.

NOTE also wants to be part of the new, high-growth application segment. NOTE views the Internet of Things as driving the need for electronics at present. And with its competence in electronics production, NOTE can also be successful here.

NOTE continued to lift profitability in the year. Reported operating profit increased to SEK 93.4 (60.2) million, which includes just over SEK 20 million of capital gains from the sale of its industrial premises in Lund, and non-recurring costs of approximately SEK 4 million, which relate mainly to the streamlining of the Swedish business. Adjusted for these non-recurring items, underlying operating profit was up by SEK 17.5 million (29 percent) to SEK 77.7 million. Computed in the same way, operating margin expanded by 1.1 percentage points to 6.6 percent. There are several reasons for the improved profitability, including higher sales, cost rationalisations executed and strong progress of NOTE's Western European units. In line with sales growth, NOTE strengthened its organisation and positioned for further growth.

Market progress still looks strong. However, one flipside of this is an increasingly strained global market for electronic components. Generally, leadtimes for components are getting longer, and the availability of some of them is deteriorating. This is nothing unusual, but does entail greater efforts by NOTE's sourcing and planning functions. NOTE is continuing to work proactively alongside customers and suppliers to ensure delivery precision and avoid costly delays in its materials flow chain.

Effective management of working capital is a success factor for continued growth. Intelligent and well-considered logistics setups are vital to NOTE's, and customers', financing and cash flow. Despite a higher investment rate, mainly intended to increase growth, NOTE improved cash flow after investments to SEK 69.7 (40.9) million.

NOTE is well placed financially for the future. Its Balance Sheet is one of the sector's strongest, with low net debt and an equity to assets ratio of 48.8 percent.

SALES AND RESULTS OF OPERATIONS 2017 Group Sales

NOTE sells to a large customer base, essentially active in the industrial, communication and security sectors, as well as the medtech and defence industries. Its customer base consists of large corporations active on the world market, as well as local enterprises whose primary sales are in northern Europe.

Sales in the year increased by 7 percent to SEK 1,175.7 (1,098.1) million. The effect of exchange rate fluctuations was limited, and adjusted for the Norwegian operation, which was divested in 2016, sales growth was 9 percent.

The demand for NOTE's services progressed positively in the year. In Western Europe, progress was good, especially in Sweden and Finland. For comparable units in Western Europe, growth was approximately 10 percent. Sales in the operation in Estonia, which are largely to customers in Europe, also progressed positively. The demand for electronics manufacture in China remained high. But sales in the Chinese operation were down somewhat on the previous year, due to

lower volumes from some major interna tional customers.

NOTE endeavours to secure long-term customer relations and partnerships. In the period, several closer collabora tions on new product generations were established with a range of customers in NOTE's strong customer base.

NOTE has also been working inten sively for some time on expanding its customer base further, to boost sales and capacity utilisation in the group's units. As a result of these marketing initia tives, NOTE secured many new customer relations. Most of these new customers are European and Asian SMEs. Several of these partnerships, which usually start with industrialisation services (service sales, prototyping and pilot series), have now resulted in batch production and higher volumes.

The 15 largest customers in sales terms represented 56 (58) percent of group sales. Similar to the previous year, no single customer (group) generated more than about 10 percent of total sales. The group's order book, consisting of a combination of fixed orders and customer forecasts, progressed well—at year-end it was up by just over 20 percent year on year.

Results of operations

In order to keep sharpening compet itiveness and create the potential for profitable sales growth, NOTE has been conducting methodical improvement work at all units for several years. This work is conducted locally at each unit and through a number of group-wide projects. Over and above initiatives to expand and develop its customer offering, NOTE's fo cus is on measures that improve delivery precision and quality performance, as well as cost and working capital rationali sation. In tandem with this process, NOTE is progressively implementing a groupwide, business-specific ERP system. This new system is operational at all Swedish units, and also went live at the unit in Estonia during the first half-year. The am bition is to enable further rationalisation by harmonising internal processes and systems support.

Gross margin in the year narrowed some what to 11.9 (12.0) percent, essentially because of a lower service content in sales from China.

Sales and administration overheads increased by 2 percent, essentially as a result of non-recurring costs associated with the change of CEO and organisational changes in Sweden. The sales resources were also reinforced, with the aim of further improving growth. Overheads were 6.2 (6.5) percent of sales.

Other operating expenses/income, which normally consist of revaluations of foreign currency assets and liabilities, were SEK 26.2 (0.3) million, of which the positive impact of the property sale in Lund was SEK 20.6 million.

Operating profit improved to SEK 93.4 (60.2) million. Underlying operating profit, adjusted for the property sale and other non-recurring items in the first quarter, improved by SEK 17.5 million to SEK 77.7 (60.2) million, equivalent to operating margin expansion of 1.1 percentage points to 6.6 (5.5) percent.

Positive progress of cash flow and market interest rates that remain low helped net financial income/expense improve, to SEK –4.6 (–5.7) million.

Profit after financial items was SEK 88.8 (54.5) million, corresponding to profit margin expansion by 2.6 percentage points to 7.6 (5.0) percent.

Profit after tax was SEK 72.1 (45.2) million, or SEK 2.50 (1.57) per share. The tax expense for the year corresponded to 19 (17) percent of profit before tax.

Parent company

The parent company, NOTE AB (publ), is primarily focused on the management, coordination and development of the group. Revenue for the year was SEK 34.8 (31.8) million, and mainly consisted of intra-group services.

Profit for the year was positively im pacted by the property sale in Lund. Net financial income/expense also includes a net of group contributions received and paid of SEK 31.3 (24.3) million, and SEK 2.3 (4.6) million of dividends received from subsidiaries. Parent company profit after tax was SEK 54.3 (–17.8) million.

FINANCIAL POSITION, CASH FLOW AND CAPITAL EXPENDITURE Cash flow

Competing successfully in the high mix/ low to medium volume market segment sets high standards on flexibility and short lead-times in manufacture, the ef fective supply of materials and the capa bility to deliver custom logistics solutions. Accordingly, NOTE puts a sharp focus on continuously improving its business methods and internal processes in these segments. This challenge is especially ap parent in customer project start-ups, and in rapid demand upturns and downturns, which are largely linked to the complexity of materials supply and varying leadtimes for electronic components.

The global market for electronic com ponents can be considered fairly cyclical. After a long period of stability and good supply of electronic components, market conditions have become more strained, with extended lead-times and shortages of certain components. This is nothing unusual, but demands extra efforts by NOTE's sourcing and planning functions, as well as maintaining close dialogues with customers and suppliers.

NOTE maintains a sharp focus on con tinuous rationalisation of its utilisation of working capital. And in these circum stances, well-executed logistics setups with customers and suppliers are critical.

Primarily because of sales and man ufacturing volumes increasing, capital tied up in stock, including supplier advances, was 16 percent higher than in the previous year. Strained conditions on the electronic component market was an additional contributor to an increase in component inventories.

NOTE works continuously on monitor ing credit risk and limiting the number of outstanding days of credit. At year-end, accounts receivable—trade, which increased for natural reasons, were up by 5 percent year on year. The implementa tion of new processes, especially in the Chinese operation, helped reduce the number of outstanding days of credit.

Accounts payable—trade are mainly sourced electronic components and other production materials. NOTE is working

actively to keep developing a partnership model for suppliers, which involves changes including concentrating sourcing on fewer, quality-assured suppliers. This simultaneously helps rationalise the utilisation of working capital. At year-end, accounts payable—trade were up by 14 percent year on year.

The combination of continued positive profit performance, including gains from the real estate divestment in Lund, and the rationalisation of working capital, contributed to cash flow after investments increasing to SEK 69.7 (40.9) million, equivalent to SEK 2.41 (1.42) per share.

Equity to assets ratio

According to NOTE's externally communicated financial targets, the equity to assets ratio should not fall below 30 percent. The equity to assets ratio at year-end was 48.8 (45.8) percent. The proposed dividend to shareholders of SEK 1.00 per share, equivalent to SEK 28.9 million, would reduce the equity to assets ratio by some 4 percentage points.

Liquidity

NOTE is continuing to put a sharp focus on measures that improve the group's liquidity and cash flow.

The group's available cash and cash equivalents, including unutilised overdraft facilities, were some SEK 139.0 (127.1) million at year-end. Factored accounts receivable—trade were approximately SEK 163 (123) million. Net debt was SEK 22.9 (60.4) million at year-end.

Investments

Capital expenditure on fixed assets in the year was SEK 25.3 (15.8) million, or 2.1 (1.4) percent of sales. The largest investment was in a new advanced surface mounting line to satisfy higher demand at the unit in Estonia. Other investments were mainly projects to improve efficiency and quality.

Plan depreciation and amortisation increased somewhat to SEK 16.1 (14.8) 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 continued to work on developing its group-wide ERP system in the year. The costs, which satisfy the criteria 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 were 600,000 outstanding share warrants as of 31 December 2017.

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 26.4 (27.0) percent and Johan Hagberg with 15.9 (15.7) 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 24–25.

GUIDELINES FOR REMUNERATING SENIOR MANAGERS

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

Remuneration to NOTE's management was decided in accordance with the Board of Director's guidelines, which were adopted by the AGM 2017.

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 in special circumstances in individual cases.

For more information on remuneration, see Note 8, Employees, personnel expenses and remuneration to senior managers, on page 52.

SUSTAINABILITY

The environment, obligation of disclosure and certification

The operations in Sweden are U-classified, and do not require advance testing or reporting. Instead, the regulatory authority (municipal environmental and health board) can require actions or further investigation—if required for environmental or health reasons.

All NOTE's production plants 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.

Human resources

The average number of full-time employees was 912 (987) in the year, 492 (573) of them being women. At year-end, NOTE had 936 (863) employees.

Work attendance in the group was 95.8 (96.0) percent of regular working hours and staff turnover was 15.5 (14.6) percent.

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

For more information on the environment, social conditions and human resources, as well as human rights and anti corruption, see the Sustainability Report on pages 14–21.

SIGNIFICANT RISKS OF OPERATIONS Operational risks

NOTE is one of the leading northern European EMS partners. It has especially strong market positioning in the high mix market segment, i.e. for products that require high technology competence and flexibility. NOTE produces PCBAs, subassemblies and box build products. The customer offering covers complete product lifecycles, from design to after-sales.

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

For more information on operational risks, see Operations on page 13.

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.

Invoicing is in Swedish krona and foreign currency, mainly USD and EUR. Otherwise, exchange rate risks lie mainly in the sourcing of production materials. Net exposure in foreign currency is essentially hedged 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 13 and Note 24 Financial risks and finance policy, on page 57–58.

POST-BALANCE SHEET EVENTS

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

EXPECTATIONS OF FUTURE PROGRESS

Based on a strong sales and earnings performance, NOTE takes a positive view of the future. Going forward, its guiding principles are growth, customer satisfaction and profitability, and it has prepared plans for improving them. Order status and activity in ongoing customer dialogues remains at a high level. Overall, NOTE sees good potential to increase its market shares.

PROPOSED APPROPRIATION OF PROFITS

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

Brought forward	32,556,878
Profit for the year	54,310,645
Total	86,867,523
Distributed to shareholders	28,872,600
Carried forward	57,994,923
Total	86,867,523

BOARD OF DIRECTORS' COMMENTS ON THE PROPOSED DIVIDEND

Against the background of NOTE's profit performance, the Board of Directors proposes a dividend payment to the shareholders of SEK 1.00 (0.70) per share, corresponding to SEK 28.9 (20.2) million. The proposed dividend to shareholders amounts to 33 percent of the company's profit as of the balance sheet date and reduces the group equity ratio from 48.8

percent to 45.0 percent calculated on year-end figures.

The Board of Directors considers that the proposed dividend conforms to The Swedish Companies Act's caution rule and is justified on the basis of stipulations relating to the company's equity, investment requirement, liquidity and financial position and the risks associated with the nature and scale of its operations.

With regard to NOTE's results of operations and financial position otherwise, please refer to the Income Statement and Balance Sheet and the Notes to the Financial Statements below. NOTE's financial year covers the period 1 January to 31 December inclusive. All amounts are in SEK 000 unless otherwise indicated.

Five-year summary

SEK m

Consolidated Income Statement	2017	2016	2015	2014	2013
Net revenue	1,175.7	1,098.1	1,121.5	964.0	907.0
Gross profit	140.3	131.7	122.5	102.4	72.5
Operating profit	93.4	60.2	45.2	31.8	9.0
Profit before tax	88.8	54.5	39.8	28.8	1.2
Profit for the year	72.1	45.2	34.6	24.6	0.7
Consolidated Balance sheet
ASSETS
Non-current assets	146.3	152.3	156.7	154.1	134.5
Current assets	609.7	542.2	506.5	458.8	406.3
TOTAL ASSETS	756.0	694.5	663.2	612.9	540.8
EQUITY AND LIABILITIES
Equity	369.2	318.0	287.1	270.2	238.1
Non-current liabilities	14.0	9.3	12.1	12.0	6.7
Current liabilities	372.8	367.2	364.0	330.7	296.0
TOTAL EQUITY AND LIABILITIES	756.0	694.5	663.2	612.9	540.8
Consolidated Cash Flow Statement
Cash flow from operating activities	39.7	48.6	18.7	15.7	4.2
Cash flow from investing activities	30.0	–7.7	–13.5	–13.2	–6.2
CASH FLOW AFTER INVESTING ACTIVITIES	69.7	40.9	5.2	2.5	–2.0
Cash and cash equivalents at beginning of period	71.6	47.3	35.2	40.8	70.7
Cash flow before financing activities	69.7	40.9	5.2	2.5	–2.0
Cash flow from financing activities	–53.8	–17.0	7.3	–10.6	–28.2
Exchange rate difference in cash and cash equivalents	–0.3	0.4	–0.4	2.5	0.3
CASH AND CASH EQUIVALENTS AT END OF YEAR	87.2	71.6	47.3	35.2	40.8
Consolidated key figures
Earnings per share (basic), SEK	2.50	1.57	1.20	0.85	0.02
Earnings per share (diluted), SEK	2.47	1.57	1.20	0.85	0.02
Cash flow per share after investing activities, SEK	2.41	1.42	0.18	0.09	–0.07
Market capitalisation at end of period	702	491	344	209	188
Operating margin, %	7.9	5.5	4.0	3.3	1.0
Profit margin, %	7.6	5.0	3.5	3.0	0.1
Return on operating capital, %	24.2	16.1	12.9	10.1	3.1
Return on equity, %	21.0	14.9	12.4	9.7	0.3
Operating capital (average)	385.2	373.7	351.7	314.7	291.4
Interest-bearing net debt	22.9	60.4	81.9	64.3	56.8
Equity to assets ratio, %	48.8	45.8	43.3	44.1	44.0
Net debt/equity ratio, multiple	0.1	0.2	0.3	0.2	0.2
Interest coverage ratio, multiple	18.3	8.6	5.3	4.8	1.1
Capital turnover rate (operating capital), multiple	3.1	2.9	3.2	3.1	3.1
Sales per employee, SEK 000	1,289	1,113	1,193	1,080	1,071

Operating margin 2017

Equity to assets ratio 2017

Cash flow per share, after investing activities, 2017

For Financial definitions, see Note 30 on page 59.

Consolidated Income Statement

SEK 000	NOTE	2017	2016
Net revenue	2, 3	1,175,719	1,098,080
Cost of goods sold and services		–1,035,394	–966,418
Gross profit		140,325	131,662
Selling expenses		–44,563	–42,349
Administrative expenses		–28,569	–29,447
Other operating revenue	4	44,284	23,507
Other operating expenses	5	–18,065	–23,203
Operating profit	3, 6, 7, 8, 9, 27	93,412	60,170
Financial income		509	1,493
Financial expenses		–5,145	–7,189
Net financial income/expense	10	–4,636	–5,696
Profit before tax		88,776	54,474
Tax	11	–16,641	–9,254
Profit for the year		72,135	45,220
Earnings per share (basic), SEK	17	2.50	1.57
Earnings per share (diluted), SEK	17	2.47	1.57

Consolidated Statement of Other Comprehensive Income

SEK 000	2017	2016
Profit for the year	72,135	45,220
Other comprehensive income
Items that can be subsequently reversed in the Income Statement:
Exchange rate differences	–1,134	6,034
Cash flow hedges	–89	–1
Tax on cash flow hedges and exchange rate difference	26	–158
Total other comprehensive income, net after tax	–1,197	5,875
Total comprehensive income for the year	70,938	51,095

Consolidated Balance Sheet

SEK 000	NOTE	31 Dec 2017	31 Dec 2016
Assets
Intangible assets	12	79,791	80,371
Property, plant and equipment	3, 13	64,448	65,349
Long-term receivables	14	1,011	1,616
Deferred tax assets	11	1,027	4,995
Total non-current assets		146,277	152,331
Inventories	3, 15	239,558	206,336
Accounts receivable–trade	23, 24	261,775	249,835
Tax receivables		3,018	3,405
Other receivables	14, 23	7,975	2,929
Prepaid expenses and accrued income	16	10,186	8,032
Cash and cash equivalents	23, 26	87,189	71,590
Total current assets		609,701	542,127
TOTAL ASSETS		755,978	694,458
Equity	18
Share capital		14,436	14,436
Other paid-up capital		218,330	217,862
Reserves		3,050	4,247
Retained profit		133,405	81,481
Total equity		369,221	318,026
Liabilities
Long-term interest-bearing liabilities	19, 23, 24	12,278	6,815
Deferred tax liabilities	11	1,728	2,464
Total non-current liabilities		14,006	9,279
Current interest-bearing liabilities	19, 23, 24	97,814	125,169
Accounts payable–trade	23, 24	195,045	171,301
Tax liabilities		3,279	2,810
Other liabilities	21	16,881	21,352
Accrued expenses and deferred income	22	59,721	46,510
Other provisions	20	11	11
Total current liabilities		372,751	367,153
TOTAL EQUITY AND LIABILITIES		755,978	694,458

For information on the group's pledged assets and contingent liabilities see Note 25 on page 59.

Consolidated Statement of Changes in Equity

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit	Total equity
Opening equity, 1 Jan 2016	14,436	217,862	–1,556	56,399	287,141
Comprehensive income
Profit for the year				45,220	45,220
Other comprehensive income
Exchange rate differences			5,961	73	6,034
Cash flow hedges
Tax on cash flow hedges and exchange rate difference			–158		–158
Total comprehensive income			5,803	45,293	51,096
Dividend				–20,211	–20,211
Closing equity, 31 Dec 2016	14,436	217,862	4,247	81,481	318,026

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit	Total equity
Opening equity, 1 Jan 2017	14,436	217,862	4,247	81,481	318,026
Comprehensive income
Profit for the year				72,135	72,135
Other comprehensive income
Exchange rate differences			–1,134		–1,134
Cash flow hedges			–89		–89
Tax on cash flow hedges and exchange rate difference			26		26
Total comprehensive income			–1,197	72,135	70,938
Payment warrants		468			468
Dividend				–20,211	–20,211
Closing equity, 31 Dec 2017	14,436	218,330	3,050	133,405	369,221

Consolidated Cash Flow Statement

SEK 000	NOTE	2017	2016
	26
Operating activities
Profit before tax		88,776	54,474
Reversed depreciation and amortisation		16,093	14,791
Other non-cash items		–20,235	–1,754
Tax paid		–12,586	–439
		72,048	67,072
Change in working capital
Increase (–)/decrease (+) in inventories		–36,138	–24,970
Increase (–)/decrease (+) in trade receivables		–21,343	–8,554
Increase (+)/decrease (–) in trade liabilities		25,086	15,051
		–32,395	–18,473
Cash flow from operating activities		39,653	48,599
Investing activities
Purchase of property, plant and equipment		–12,859	–7,403
Purchase of intangible assets		–1,128	–1,574
Sale of property, plant and equipment		44,000	–
Sale of subsidiary/operation, net liquidity effect		–	3,987
Sale of financial assets		–	–2,759
Cash flow from investing activities		30,013	–7,749
Financing activities
Borrowings		–	5,396
Amortisation of loans		–34,044	–2,177
Payment warrants		468	–
Dividends paid		–20,211	–20,211
Cash flow from financing activities		–53,787	–16,992
Cash flow for the year		15,879	23,858
Cash and cash equivalents
At beginning of period		71,590	47,298
Cash flow before financing activities		69,666	40,850
Cash flow from financing activities		–53,787	–16,992
Exchange rate difference in cash and cash equivalents		–280	434
Cash and cash equivalents at end of period		87,189	71,590

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 28.

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 3 April 2018. The Consolidated Income Statement and Balance Sheet will be subject to adoption at the AGM (Annual General Meeting) on 26 April 2018. 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.

Revised accounting principles

None of the IFRS or IFRIC interpretation statements that are mandatory for first-time adoption in accounts for financial years beginning 1 January 2017 or later are expected to have any material effect on the group.

New standards and interpretation statements that have not yet been applied by the group

A number of new standards and interpretation statements come into effect for financial years beginning after 1 January 2017 and have not been applied when preparing these financial statements. None of them are expected to have any material effect on the consolidated financial statements, apart from those stated below:

IFRS 9 Financial Instruments deals with the classification, measurement and presentation of financial assets and liabilities, and replaces those parts of IAS 39 that deal with the classification and measurement of financial instruments. This standard maintains a hybrid measurement approach, which is simplified in certain respects. There will be three measurement categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss. How an instrument should be classified depends on the company's business model and the characteristics of the instrument. IFRS 9 also introduces a new model for measuring credit loss reserves, which is based on expected bad debt. For financial liabilities, classification and measurement does not change, apart from the case where a liability is recognized at fair value through profit or loss based on the fair value option. IFRS 9 reduces the requirement to apply hedge accounting by replacing the 80-125 criterion with the requirement of an economic relationship between the hedging instrument and the hedged item, and that the hedging quotient should be the same as used in risk management. The standard should be applied to financial years beginning 1 January 2018. Prospective application is permitted.

IFRS 9 introduces a new method for measuring the risk of bad debt. As in previous years, NOTE has provisioned on the basis of individually measured credit risk per customer. Based on a measurement of historical performance, the reserve for credit risks will be increased by some SEK 6 million. This reserve will be accounted against consolidated equity, when IFRS 9 is being introduced effective 1 January 2018. Otherwise, IFRS 9 will not have any material effect on the consolidated financial statements.

IFRS 15 Revenue from Contracts with Customers formalises the recognition of revenues. The basic principle of IFRS 15 is that a company recognizes revenue in a manner that best reflects the transfer of the promised good or service to the customer. This recognition is applied using a five-step model. The principles IFRS 15 is based on should provide users of financial statements with more useful information on the company's revenues. The extended disclosure requirement means that information on revenue class, the timing of settlement, uncertainties associated with revenue recognition and cash flow attributable to the company's customer contracts should be provided. Revenue should be recognised when the customer obtains control over the sold good or service, and has the ability to use or receive benefits from the good or service. IFRS 15 replaces IAS 18 Revenues and IAS 11 Construction Contracts, as well as the associated SIC and IFRIC interpretation statements. IFRS 15 is effective 1 January 2018.

NOTE has conducted a review of the introduction of IFRS 15 and judges that the standard will not have any material effect on the consolidated financial statements.

The IASB published a new standard on leases in January 2016, IFRS 16 Leases, which will replace IAS 17 Leases and the associated SIC and IFRIC interpretation statements. This standard requires that assets and liabilities attributable to all lease arrangements, with certain exceptions, are recognized in the Balance Sheet. This recognition is based on the view that the lessee has the right to use an asset for a certain period of time, with a simultaneous obligation to pay for that right. This standard applies to financial years beginning 1

January 2019. Prospective adoption is permitted.

A project to quantify the effects on the group of implementing IFRS 16 on its financial statements is ongoing. This process will continue in 2018. For a view of the scope of the group's lease commitments, see note 7 Operating leases on page 51.

None of the other IFRS or IFRIC interpretation statements that have yet to come into effect are expected to have any material effect on the group.

Operating segments

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 12 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:

20 years
see below

5 years
20 years
see below
5 years
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. There is no amortisation of goodwill. 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 Western Europe and Rest of World 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.

In 2014, the group commenced implementation of a new ERP system whose cost was covered by purchased consulting hours and time allocated to the project internally, which satisfies the criteria for capitalised expenditure.

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	10 years
Capitalised expenditure for process development	3–5 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.

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 Operating segments

Significant key figures for NOTE's operating segments are in the following table. Western Europe consist of units located in geographical regions with high industrial activity and innovation standards in Sweden, Finland and the UK. These units provide advanced production technology services in close collaboration with customers, such as component selection, developing test equipment, prototyping and batch production. Rest of World, located in Estonia and China, are close to large end markets and in regions with strong traditions of production and high competence levels. In addition to development-oriented services, these units also offer cost-efficient volume production of PCBAs and box build products. Intra-Group are group-wide business support functions in the parent company and for the sourcing operations in NOTE Components.

		Western Europe		Rest of World		Intra-group		Total
	2017	2016	2017	2016	2017	2016	2017	2016
NET REVENUE
External net revenue	671,343	638,097	504,376	459,983	–	–	1,175,719	1,098,080
Internal net revenue	10,251	6,229	74,337	127,222	–84,588	–133,451	–	–
Net revenue	681,594	644,326	578,713	587,205	–84,588	–133,451	1,175,719	1,098,080
OPERATING PROFIT
Operating profit	56,364	25,565	24,678	39,026	12,370	–4,421	93,412	60,170
Operating profit	56,364	25,565	24,678	39,026	12,370	–4,421	93,412	60,170
Financial income and expenses–net							–4,636	–5,696
Profit before tax							88,776	54,474
SIGNIFICANT ASSETS BY SEGMENT
Property, plant and equipment	17,051	24,064	46,974	41,045	423	240	64,448	65,349
Inventories	129,435	106,679	110,123	99,657	–	–	239,558	206,336
External accounts receivable–trade	158,948	126,230	102,473	123,180	354	425	261,775	249,835
Total assets	409,461	375,282	336,942	319,305	9,575	–129	755,978	694,458
OTHER INFORMATION
Investments in property, plant and equipment	7,651	6,522	16,230	6,918	337	746	24,218	14,186
Depreciation and amortisation	–5,596	–5,783	–8,906	–7,762	–1,591	–1,246	–16,093	–14,791
Other non-cash items (excl. depreciation and amortisation)	869	390	2,964	3,587	–24,068	–5,731	–20,235	–1,754
Average number of employees	287	298	606	670	19	19	912	987

NOTE's registered office is in Sweden. Revenues from external customers in Sweden were SEK 599.0 (452.8) million, from the rest of Europe SEK 392.2 (385.1) million and from the rest of the world SEK 184.5 (260.2) million. Generally speaking, NOTE has a diversified customer base where no single customer represents more than 10 percent of total group sales. Non-current assets in Sweden (excluding financial) were SEK 52.5 (61.4) million, in Estonia SEK 32.6 (19.6) million, the UK SEK 4.0 (4.4) million and in other countries SEK 55.2 (60.4) million as of the reporting date. Deferred tax assets in Sweden were SEK –1.2 (–1.9) million, in the UK SEK – (4,2) million and other countries SEK 2.2 (2.7) million as of the reporting date.

NOTE 4 Other operating revenue

	2017	2016

Exchange gains on trade receivables/liabilities	20,899	16,322
Gain on disposal of non-current asset	22,063	–
Other	1,321	7,185
Total	44,284	23,507

NOTE 5 Other operating expenses

	2017	2016
Exchange losses on trade receivables/liabilities		–16,943 –18,580
Other	–1,122	–4,623
Total	–18,065 –23,203

NOTE 7 Operating leases

Premises rent	31 Dec 2017	31 Dec 2016
Lease arrangements payable within one year	15,362	11,553
Lease arrangements payable between one and five years	38,995	25,436
Total	54,357	36,989

Group costs for premises rent in 2017 were 14,409 (12,676).

Other operating leases	31 Dec 2017	31 Dec 2016
Lease arrangements payable within one year	2,306	2,646
Lease arrangements payable between one and five years	4,900	5,222
Total	7,206	7,868

Group costs for other operating leases were 2,231 (2,659) in 2017.

NOTE 6 Operating expenses by type

	2017	2016
Cost of goods and materials	–734,494	–669,036
Personnel expenses	–257,647	–251,491
Depreciation and amortisation	–16,093	–14,791
Other	–118,357	–126,099
Total	–1,126,591	–1,061,417

NOTE 8 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits	2017	2016
Salaries and benefits	–194,789	–192,994
Pension expenses, defined-benefit plans	–	–
Pension expenses, defined-contribution plans	–15,142	–12,880
Social security contributions	–47,716	–45,617
Total	–257,647	–251,491

Alecta

The commitments for retirement and survivors' pensions for salaried employees in Sweden are largely insured through a policy with Alecta. Statement UFR10 from The Swedish Financial Reporting Board, Classification of ITP plans financed by insurance in Alecta, defines this as a defined-benefit multi-employer plan. For the financial year 2017, the company did not have access to sufficient information enabling the plan to be reported as a definedbenefit 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 2.7 (2.9) million. The charges for next year are estimated at some SEK 2.8 million. The group's share of total expenditure to the plan is negligible and is less than 0.0015 percent. Alecta's surplus can be divided between policyholders and/or beneficiaries. At year-end 2017, Alecta's surplus, expressed as a collective consolidation ratio was 154 (149) 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.

	2017	2016
Expenses for defined-contribution plans*		–15,142 –12,880

*Includes 2,667 (2,904) for an ITP plan insured with Alecta.

Senior management's remuneration Basic salary, Directors' fees Performance related pay Other benefits Pension expenses Total Remuneration and other benefits 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 Chairman of the Board: John Hedberg, since January 2017 –242 – – – – – – – –242 – Kristian Teär, left in January 2017 –25 –300 – – – – – – –25 –300 Board members: Kjell-Åke Andersson –162 –100 – – – – – – –162 –100 Bruce Grant, left in January 2017 –8 –100 – – – – – – –8 –100 Johan Hagberg, since January 2017 –98 – – – – – – – –98 – Bahare Hedenstierna –107 –100 – – – – – – –107 –100 Stefan Johansson, left in January 2017 –13 –160 – – – – – – –13 –160 Henry Klotz, left in January 2017 –8 –100 – – – – – – –8 –100 Mikael Norin, since April 2017 –73 – – – – – – – –73 – Daniel Nyhrén, left in January 2017 –8 –100 – – – – – – –8 –100 Per Ovrén, since January 2017 –43 – – – – – – – –43 – CEO: Stefan Hedelius, left in April 2017 –1,572 –3,078 –1,202 –688 –124 –117 –427 –507 –3,325 –4,390 Henrik Nygren, acting CEO –279 –364 –57 –37 –12 –16 –64 –88 –412 –505 Per Ovrén, since June 2017 –995 – –599 – –29 – –365 – –1,988 – Other senior management (4 (4) people) –4,454 –4,659 –1,204 –659 –311 –278 –1,572 –1,448 –7,541 –7,044 Total –8,087 –9,061 –3,062 –1,384 –476 –411 –2,428 –2,043 –14,053 –12,899

Comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit for 2017. There was a profitability-based, performance-related remuneration program for the CEO, senior managers, subsidiary Presidents and other key staff, during the financial year 2017. This program had 19 (20) participants. In 2017, an estimated outcome of SEK 4.8 (2.3) million excluding social security contributions, was charged to the group's profit, of which SEK 2.6 (1.4) million related to senior managers. The Report of the Directors states the details of the remuneration guidelines for senior managers.

Share warrant programme

From its own holdings, NOTE's largest shareholder Creades AB issued call options to senior managers during the first quarter. These call options related to some 2 percent of the total number of outstanding NOTE shares. Exercise was during the fourth quarter, when senior managers acquired a total of 196,000 shares, or 0.7 percent of the total number of outstanding NOTE shares.

NOTE's AGM on 20 April 2017 resolved to introduce a long-term incentive programme (three years) for senior managers and key individuals. The programme has six participants. The incentive programme involved the issue of 600,000 share warrants, corresponding to approximately 2 percent of the number of outstanding NOTE shares. The share warrants have been granted equally between participants of the programme. For the Chief Executive Officer, this equates to 100,000 share warrants, for other senior managers, a total of 400,000 share warrants, and for key individuals, a total of 100,000 share warrants. The programme was fully subscribed. Pricing of the incentive programme was on an arm's length basis, at a subscription price of SEK 23.30 per share. The fair value of options was measured pursuant to the Black & Scholes option valuation model. The fair value amounted to SEK 0.78 per share warrant. The constituent parameters of the valuation models were as follows: share price of SEK 17.93, based on the average share price in the period 20 April 2017 to 11 May 2017, interest of 0.0 percent, volatility of 27 percent and dividend pursuant to NOTE's dividend policy.

Average number of employees		2017 Of which men		2016 Of which men
Sweden	228	73%	233	72%
Norway	–	–	11	48%
UK	28	46%	28	50%
Finland	46	58%	45	60%
Estonia	276	25%	246	25%
China	334	43%	424	34%
Group total	912	46%	987	42%

	2017	2016
Division between sexes in group management	Share of women	Share of women
Board members, Presidents	26%	28%
Other senior management, 4 (4) people	0%	0%

NOTE 9 Auditors' fees and reimbursement

	2017	2016
PwC
Auditing assignment	–963	–970
Other services	–403	–291
Other Auditors
Auditing assignment	–337	–423
Auditing in addition to audit assignment	–	–7
Tax consultancy	–22	–
Other services	–668	–633

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

NOTE 10 Net financial income/expense

	2017	2016
Interest income on bank balances	106	187
Exchange rate gains	403	1,306
Other	–	–
Financial income	509	1,493
Interest costs on financial liabilities measured
at amortised cost	–1,857	–2,161
Bank charges	–2,486	–2,730
Exchange rate losses	–461	–1,434
Other	–341	–864
Financial expenses	–5,145	–7,189
Net financial income/expense	–4,636	–5,696

NOTE 11 Tax

Reported in Income Statement	2017	2016	Reconciliation of effective tax	%	2017	%	2016
Current tax expense (–)/tax revenue (+)			Profit before tax		88,776		54,474
Tax expense for the period	–12,043	–5,428	Tax at applicable rate for parent company		–22.0 –19,531 –22.0 –11,984
Adjustment of tax attributable to previous year	–1,422	306	Effect of other tax rates for foreign subsidiaries	3.1	2,756	4.1	2,239
			Non-deductible expenses	–3.2	–2,874	–1.2	–681
Deferred tax expense (–)/tax revenue (+)			Non-taxable revenue	8.8	7,810	8.7	4,745
Deferred tax relating to temporary differences/			Un-reported tax revenue on loss for the year	–0.3	–283	–0.7	–390
appropriations	989	1,039	Tax attributable to utilised portion of loss carry-forwards	0.1	76	–	–
Deferred tax revenue/expense in capitalised/utilised			Tax attributable to impairment of loss carry-forwards	–4.7	–4,165	–	–
tax value in loss carry-forward	–4,165	–5,171	Tax attributable to previous year	–1.6	–1,422	0.6	306
Adjustment of tax attributable to previous year	–	–	Other	1.1	992	–6.4	–3,489
Total reported tax in group	–16,641	–9,254	Total reported tax in group		–18.7 –16,641 –17.0 –9,254

	Deferred tax asset			Deferred tax liability	Net
Recognised in Balance Sheet	31 Dec 2017	31 Dec 2016	31 Dec 2017	31 Dec 2016	31 Dec 2017	31 Dec 2016
Property, plant and equipment	–39	–34	1,038	2,024	–1,077	–2,058
Derivatives measured at fair value	76	15	–	–	76	15
Loss carry-forwards	–	4,165	–	–	–	4,165
Provisions	990	849	–	–	990	849
Untaxed reserves	–	–	690	440	–690	–440
Tax receivables/liabilities	1,027	4,995	1,728	2,464	–701	2,531

Deferred tax assets and loss carry-forwards

Deferred tax assets relates to temporary differences relating to valuation of fixed assets and provisions, which will be divided over a number of years.

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. In 2017, an impairment loss of SEK –4.2 (–) million was taken on previously capitalised loss carry-forwards relating to one of NOTE's subsidiaries. This impairment was taken because the company judges that it will not be able to utilise the loss carry-forward in the coming years due to the size of the operation of the subsidiary they relate to. 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 4.3 (0.4) million. None of the loss carry-forwards are subject to time limitation.

Provisions for deferred tax	31 Dec 2017	31 Dec 2016
Carrying amount at beginning of period	2,464	2,359
Amount provisioned in period	256	150
Amounts utilised in period	–992	–45
Carrying amount at the end of period	1,728	2,464

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

2016				2017
	Balance as of 1 Jan	Reported in Income Statement	Reported against Comprehen sive Income	Reported directly in equity	Balance as of 31 Dec	Balance as of 1 Jan	Reported in Income Statement	Reported against Comprehen– sive Income	Reported directly in equity	Balance as of 31 Dec
Property, plant and equipment	–1,983	–75	–	–	–2,058	–2,058	1,037	–56	–	–1,077
Derivatives measured at fair value	12	3	–	–	15	15	36	26	–	77
Loss carry-forward	7,654	–3,616	127	–	4,165	4,165	–4,165	–	–	–
Provisions	1,271	–419	–3	–	849	849	140	–	–	989
Untaxed reserves	–415	–25	–	–	–440	–440	–250	–	–	–690
Total	6,539	–4,132	124	–	2,531	2,531	–3,202	–30	–	–701

NOTE 12 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, Critical 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 2016	72,437	13,394	1,899	87,730
Investments	–	1,574	–	1,574
Reclassification and exchange rate effects	–17	–279	27	–269
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2016	72,420	14,689	1,926	89,035
Opening balance, 1 Jan 2017	72,420	14,689	1,926	89,035
Investments	–	1,096	32	1,128
Reclassification and exchange rate effects	–157	–	19	–138
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2017	72,263	15,785	1,977	90,025
Accumulated amortisation and impairment
Opening balance, 1 Jan 2016	–2,030	–3,749	–1,580	–7,359
Reclassification and exchange rate effects	–	–	–13	–13
Amortisation for the year	–	–1,172	–120	–1,292
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2016	–2,030	–4,921	–1,713	–8,664
Opening balance, 1 Jan 2017	–2,030	–4,921	–1,713	–8,664
Reclassification and exchange rate effects	–	–	–13	–13
Amortisation for the year	–	–1,441	–116	–1,557
Sales and retirements	–	–	–	–
Closing balance, 31 Dec 2017	–2,030	–6,362	–1,842	–10,234
Carrying amounts
As of 1 Jan 2016	70,407	9,645	319	80,371
As of 31 Dec 2016	70,390	9,768	213	80,371
As of 1 Jan 2017	70,390	9,768	213	80,371
As of 31 Dec 2017	70,233	9,423	135	79,791

Amortisation and impairment are included in

following Income Statement lines	2017	2016
Cost of goods sold and services	–1,334	–1,292
Selling expenses	–223	–
Total	–1,557	–1,292

Impairment testing of goodwil

NOTE allocates and tests goodwill in the Western Europe and Rest of World operating segments. The following table states goodwill values by operating segment.

	31 Dec 2017	31 Dec 2016
Western Europe	58,059	58,216
Rest of World	12,174	12,174
Total	70,233	70,390

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	The cost of electronic components is expected to reduce during the forecast period, partly because of continued ra tionalisation 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.

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 testing is conducted in the two operating segments– Western Europe and Rest of World. As operations are monitored otherwise, goodwill is monitored and impairment is tested at operating segment level.

Testing is based on estimated present values of future cash flows for each constituent legal entity of the operating segment. The present value of these aggregated cash flows are then compared with the goodwill and capital employed that is allocated to the operating segment.

The present value of forecast cash flow is calculated by applying a discount rate after tax based on risk-free interest and the risk judged to be associated with the operation. Against the background of NOTE mainly having shared borrowings, and that the group's entities operate on the same markets, the same discount rate after tax of 9.0 (9.2) percent has been applied for both operating segments. The discount rate before tax amounts to 11.1 (11.8) percent.

The recoverable values for both Western Europe and Rest of World exceed carrying amounts.

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 9.0 to 10.0 percentage points, would not imply any impairment.

Value in use reduces but still significantly exceeds the carrying amount of both Western Europe and Rest of World.

NOTE 13 Property, plant and equipment

	Buildings and land (real estate used in business operations)	Cost incurred on other party's property	Machinery and other plant	Equipment, tools, fixtures and fittings	Total
Cumulative cost
Opening balance, 1 Jan 2016	45,857	9,240	158,068	41,194	254,359
Investments	–	211	13,054	921	14,186
Sales	–	–	–6,436	–3,124	–9,560
Reclassification and exchange rate effects	957	–235	–4,907	–4,629	–8,814
Closing balance, 31 Dec 2016	46,814	9,216	159,779	34,362	250,171
Opening balance, 1 Jan 2017	46,814	9,216	159,779	34,362	250,171
Investments	–	1,153	22,268	797	24,218
Sales	–24,175	–	–2,215	–173	–26,563
Reclassification and exchange rate effects	627	–126	–487	–86	–72
Closing balance, 31 Dec 2017	23,266	10,243	179,345	34,900	247,754
Depreciation and impairment
Opening balance, 1 Jan 2016	–22,207	–7,022	–118,841	–40,359	–188,429
Depreciation for the year	–715	–618	–11,610	–556	–13,499
Sales	–	–	5,241	2,970	8,211
Reclassification and exchange rate effects	–551	292	5,127	4,027	8,895
Closing balance, 31 Dec 2016	–23,473	–7,348	–120,083	–33,918	–184,822
Opening balance, 1 Jan 2017	–23,473	–7,348	–120,083	–33,918	–184,822
Depreciation for the year	–505	–699	–12,795	–537	–14,536
Sales	13,748	–	1,951	173	15,872
Reclassification and exchange rate effects	–394	95	399	80	180
Closing balance, 31 Dec 2017	–10,624	–7,952	–130,528	–34,202	–183,306
Carrying amounts
As of 1 Jan 2016	23,650	2,218	39,227	835	65,930
As of 31 Dec 2016	23,341	1,868	39,696	444	65,349
As of 1 Jan 2017	23,341	1,868	39,696	444	65,349
As of 31 Dec 2017	12,642	2,291	48,817	698	64,448

Depreciation and impairment is included in the following Income Statement lines

	2017	2016
Cost of goods sold and services	–14,291	–13,091
Administrative expenses	–237	–269
Selling expenses	–8	–139
Total	–14,536	–13,499

Leased production equipment via several different lease contracts*

	2017	2016
Opening balance	35,273	34,462
Investments and exchange rate effects	13,849	4,801
Sales / obsolescence	–86	–3,990
Accumulated depreciation and exchange rate effects	–20,963	–14,488
Total	28,073	20,785

*Included under Machinery and other plant in the table showing Property, plant and equipment.

Sale of property in Lund

NOTE's industrial premises in Lund, southern Sweden, were sold to Estancia Bostad AB in March. The purchase price, which has been paid in full, was SEK 44.0 million. Simultaneously, a multi-year lease contract was signed with NOTE Lund as tenant.

The transaction had a SEK 20.6 million positive effect on NOTE's operating profit in the first quarter.

Collateral

As of 31 December 2017, property with a carrying amount of 12,642 (23,341) was pledged as collateral for bank borrowings. As of 31 December 2017, there is ownership reservation on machinery, with a carrying amount of 744 (913).

NOTE 14 Long-term receivables and other receivables

Long-term receivables	31 Dec 2017	31 Dec 2016
Interest-bearing loans	–	–
Other long-term receivables	1,011	1,616
Total	1,011	1,616
Other receivables that are current asset
Interest-bearing loans	–	–
VAT	3,940	1,333
Other	4,035	1,596
Total	7,975	2,929

NOTE 15 Inventories

	31 Dec 2017	31 Dec 2016
Raw materials and consumables	188,918	157,763
Products in process	21,316	17,567
Finished goods and goods for re-sale	44,162	42,981
Obsolescence provision	–14,838	–11,975
Total	239,558	206,336

The expensed inventories for the year are stated in Note 6, Operating expenses by type, on page 51.

NOTE 16 Prepaid expenses and accrued income

	31 Dec 2017	31 Dec 2016
Accrued income	3,683	2,812
Prepaid services	1,159	958
Prepaid rent	3,042	2,020
Prepaid licenses	1,299	1,169
Prepaid insurance	241	323
Prepaid lease payments	179	187
Other prepaid expenses	583	563
Total	10,186	8,032

NOTE 17 Earnings per share

	Before dilution		After dilution
Earnings per share	2017	2016	2017	2016
Earnings per share, SEK	2.50	1.57	2.47	1.57

The calculation of earnings per share for 2017 is based on profit for the year of SEK 72,135 (45,220) and a weighted number of outstanding shares in 2017 of 28,872,600 (28,872,600) before dilution. After dilution effects, the weighted average number of outstanding shares in 2017 is 29,172,600 (28,872,600).

Earnings per share after dilution

As of 31 December 2017, NOTE had issued share warrants on 600,000 shares.

NOTE 18 Equity

	Share class A
No. of shares (thousands)	31 Dec 2017	31 Dec 2016
Issued as of 1 January	28,873	28,873
lssued as of 31 December–paid up	28,873	28,873

As of 31 December 2017 registered share capital comprised 28,872,600 shares with a quotient value of SEK 0.50 each. There were 600,000 share warrants as of 31 December 2017. There were no other instruments that could cause dilution effects as of 31 December 2017. 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, a premium of SEK 4 per share in the rights issue of 2010, less issue expenses and payment for warrants issued in 2017.

Reserves

Translation reserve	31 Dec 2017	31 Dec 2016
Opening translation reserve	4,264	–1,541
Translation differences for the year	–1,110	5,805
Closing translation reserve	3,154	4,264

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 2017	31 Dec 2016
Opening hedging reserve	–17	–16
Forecast cash flow hedges for the year	–87	–1
Closing hedging reserv	–104	–17

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

Capital structure target

The minimum equity ratio should be 30 percent. At year-end, the equity to assets ratio was 48.8 (45.8) 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 19 Interest-bearing liabilities

Non-current liabilities	31 Dec 2017	31 Dec 2016
Bank loans	96	325
Finance lease liabilities, fixed assets	12,182	6,490
Total	12,278	6,815
Current liabilities
Overdraft facility	4,078	–
Factoring	87,765	117,851
Short-term portion of bank loans	230	230
Short-term portion of finance lease liabilities	5,741	7,088
Total	97,814	125,169

Pledged assets

14,420 (25,506) of collateral for bank loans, finance lease liabilities and overdraft facilities is pledged in the company's land and buildings (see also Note 13) and 212,648 (212,409) in operations. Collateral for factoring is issued at an amount of 163,366 (123,694) in pledged accounts receivable–trade.

90 percent of the risk associated with customer receivables–trade for NOTE's factoring engagements in Estonia have been transferred to the lender. To comply with applicable regulations, this financing is also reported as factoring, totaling 12,657 (17,189).

Fair value on non-current liabilities	Carrying amount		Fair value
	2017	2016	2017	2016
Finance lease liabilities, fixed assets	12,182	6,490	11,470	5,827

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 4.0 (9.2) percent.

Finance lease liabilities

Finance lease liabilities are due for payment as follows:

	2017			2016
	Minimi lease			Minimi lease
	payments Interest Prinipal			payments Interest Prinipal
Within one year	5,973	232	5,741	7,740	652	7,088
Between one and five
years	12,675	492	12,182	7,087	597	6,490
Total	18,648	724	17,923	14,827		1,249 13,578

For more information, see Note 24 Financial risks and finance policy on page 57.

NOTE 20 Provisions

Short-term portion of provision	31 Dec 2017	31 Dec 2016
Other	11	11
Total	11	11

	2017	2016
Carrying amount at beginning of period	11	12
Provisions in the period	–	11
Amounts utilised in the period	–	–12
Un-utilised amounts reversed in the period	–	–
Carrying amount at end of period	11	11

NOTE 21 Other current liabilities

	31 Dec 2017	31 Dec 2016
Staff withholding tax	3,726	4,298
Social security contributions	3,522	3,765
VAT	8,517	8,120
Other	1,116	5,169
Total	16,881	21,352

NOTE 22 Accrued expenses and deferred income

	31 Dec 2017	31 Dec 2016
Accrued salaries and benefits	12,752	10,462
Accrued social security contributions	8,943	7,616
Accrued vacation payment	19,742	18,806
Other	18,284	9,626
Total	59,721	46,510

The Other item above includes expenses related to the sale of the property in Lund of SEK 8.4 (–) million.

NOTE 23 Financial instruments by category

31 Dec 2017	Loans and accounts receivable	Derivatives used for hedging purposes	Other financial liabilities	Total
Assets in the Balance Sheet
Accounts receivable–trade and other financial receivables Cash and cash equivalents	261,775 87,189	– –	– –	261,775 87,189
Total assets Liabilities in the Balance Sheet	348,964	–	–	348,964
Interest-bearing liabilities	–	–	110,092	110,092
Other liabilities Accounts payable–trade and other financial liabilities	– –	344 –	– 195,045	344 195,045
Total liabilities	–	344	305,137	305,481

31 Dec 2016	Loans and accounts receivable	Derivatives used for hed ging purposes	Other financial liabilities	Total
Assets in the Balance Sheet
Accounts receivable–trade and other financial receivables Cash and cash equivalents	249,835 71,590	– –	– –	249,835 71,590
Total assets Liabilities in the Balance Sheet	321,425	–	–	321,425
Interest-bearing liabilities	–	–	131,984	131,984
Other liabilities Accounts payable–trade and other financial liabilities	– –	70 –	– 171,301	70 171,301
Total liabilities	–	70	303,285	303,355

For more information on financial instruments measured at fair value, see note 24 Financial risks and finance policy on page 57.

NOTE 24 Financial risks and finance policy

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

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

The group's guidelines for loan financing state that there should be one main lender.

The 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 163 (124) 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 1.6 (1.8) percent was charged to consolidated profit.

NOTE has agreed on a number of covenants to its lender as security for the liabilities. There were no breaches of covenants in the year.

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 369.2 (318.0) million of equity and interest-bearing liabilities of SEK 110.1 (132.0) million, utilised overdrafts of SEK –4.1 (–) million are included. The un-utilised overdraft facility was SEK 51.8 (55.5) million at year-end. Financial liabilities comprise loans and the utilised portion of the overdraft and factoring facilities.

Age analysis, financial liabilities

		Within	1–3	3 mth.		5 yr. or
2017, SEK million	Total	1 mth.	mth.	–1 yr.	1–5 yr.	longer
Bank credit facilities inclu
ding overdraft & factoring*	92.3	58.7	14.7	18.8	0.1	–
Finance lease liabilities*	18.9	0.6	1.6	3.8	12.9	–
Accounts payable–trade	195.0	128.1	59.0	7.9	–	–
Total	306.2	187.4	75.3	30.5	13.0	–



2016, SEK million	Total	Within 1 mth.	1–3 mth.	3 mth. –1 yr.	1–5 yr.	5 yr. or longer

Bank credit facilities inclu ding overdraft & factoring*	118.7	79.1	20.5	18.8	0.3	–
Finance lease liabilities*	14.9	0.6	1.7	5.2	7.4	–
Accounts payable–trade	171.3	113.2	50.4	7.7	–	–

*Factoring and overdraft facilities are subject to estimated average interest of 1.6 (1.8) percentage points. A majority of these credits mature within three months. Finance lease liabilities are subject to estimated average interest of 4.0 (9.2) percentage points and a majority of these credits mature within 1–5 year.

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 22.9 (60.4) 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 2017	31 Dec 2016
Currency	Amount	%	Amount	%
CNY	82,648	22.4	79,159	24.9
EUR	60,004	16.3	44,469	14.0
GBP	–2,744	–0.7	–1,485	–0.5
NOK	2,649	0.7	2,790	0.9
Total	142,557	38.7	124,933	39.3

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 50 (48) 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 2017	31 Dec 2016
Not overdue accounts receivable–trade	203,136	187,664
Overdue accounts receivable–trade 0–30 days	44,691	30,983
Overdue accounts receivable–trade > 30 days–60 days	9,387	15,471
Overdue accounts receivable–trade > 60 days	4,561	15,717
Total	261,775	249,835

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. Against the background of underlying pricing of electronic components being basically in USD, despite actual purchasing often being conducted in EUR, NOTE considers it relevant to disclose the effects of the aggregate exposure to EUR and USD.

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, Euro or USD and with a fairly even division between these currencies. 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

	from sales and purchasing in foreign currencies			Total hedging		Percantage		Average exchange rate
	2017	2016	2017	2016	2017	2016	2017	2016
EUR	3,369	1,645	1,233	380	37%	23%	9.91	9.47
USD	7,384	6,077	4,450	1,995	60%	33%	8.29	8.56

The group classifies its forward contracts used for hedging forecast transactions as cash flow hedging.

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

The following table illustrates the effect on the group from changes in a number of parameters.

	Effect on comprehensive income
		2017	2016
Market risk, SEK million	+/– 2% +/– 5%		+/– 2% +/– 5%
Change in sales price to customers	18.3	45.9	17.1	42.8
Change in sales volume	4.7	11.9	4.7	11.7
Change in materials price*	11.5	28.6	10.4	26.1
Change in payroll overheads	4.1	10.2	4.0	10.0
Change in interest rates	0.4	0.9	0.9	2.4
Change in EUR/USD exchange rate on customer and supplier liabilities as of 31 Dec	1.1	2.8	0.6	1.5
Currency change on net assets in foreign subsidiaries	2.9	7.1	2.4	6.0

*Disregarding price adjustment clauses to customers.

NOTE 25 Pledged assets and contingent liabilities

Pledged assets for own liabilities and provisions	31 Dec 2017	31 Dec 2016
Property mortgage	14,420	25,506
Floating charge	212,648	212,409
Ownership reservation on machinery	744	913
Factored accounts receivable–trade	163,366	122,579
Total	391,178	361,407

Contingent liabilities
Guarantees issued	42,568	48,561
County administrative board, conditional loan	–	492
Total	42,568	49,053

NOTE 26 Cash Flow Statements

Interest paid	2017	2016
Interest received	123	–55
Interest paid	–2,700	–3,642

Other non-cash items
Impairment losses	3,832	6,740
Unrealised exchange rate differences	1,196	1,059
Capital gain/loss on sale of property, plant and equipment	–33,430	–8
Other items not affecting liquidity	8,167	–9,544
Total	–20,235	–1,754

Cash and cash equivalents	31 Dec 2017	31 Dec 2016
Cash and bank balances	87,189	71,590
Un-utilised overdraft facilities	51,759	55,524
Total	138,948	127,114

			Non-cash items
	31 Dec 2016	Cash flow	Borrowings, finance leases	Exchange rate	differences 31 Dec 2017
Long-term interest-bearing liabilities	6,815	–3,599	9,086	–24	12,278
Current interest bearing liabilities		125,169 –30,445	2,272	818	97,814
Total		131,984 –34,044	11,358	794	110,092

NOTE 27 Close relations

	2017	2016

Sale of goods and services to related parties	–	–
Purchases from related parties	–	–3,380
Liability to related party as of 31 December	–	953
Receivable from related party as of 31 December	–	–

Incentive programmes

NOTE's AGM resolved to introduce a long-term incentive programme (three years) for senior managers and key individuals. The incentive programme involves the issue of 600,000 share warrants.

Pricing of the incentive programme was on an arm's length basis, and both programmes were fully subscribed.

For more information on transactions with key staff in executive positions, see Note 8, Employees, personnel expenses and remuneration to senior management, on page 52.

NOTE 28 Critical estimates and judgements

Critical judgements when applying the group's accounting principles

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

Accounts receivable–trade and inventories

Accounts receivable–trade and inventories are the largest asset items in value terms 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 2017 was SEK –14.8 (–12.0) million and the reserve for doubtful debt was SEK –8.7 (–7.8) million. Note 24 provides more information on the judgements made and information on the risks associated with these asset items.

Goodwill

The group's goodwill relates to the Swedish and foreign subsidiaries. Goodwill is subject to impairment tests in accordance with IAS 36 Impairment of Assets. On 31 December 2017, goodwill on consolidation was SEK 70.2 (70.4) million. Note 12 states more information on the measurement of goodwill items.

Deferred tax assets

The group's deferred tax assets mainly consist of provisions. In previous years, there were also capitalised loss carry-forwards in foreign subsidiaries. These carry-forwards were impaired by SEK –4.2 (–) million in the year. This impairment was taken because the company judges that it will not be able to utilise the loss carry-forwards in the coming years due to the size of the operation of the subsidiary they relate to. An impairment loss was taken on these loss carry-forwards in the year. On the reporting date 31 December 2017, the consolidated deferred tax asset was SEK 1.0 (5.0) million. Note 11 states more information on the group's deferred tax assets.

NOTE 29 Post-balance sheet events

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

NOTE 30 Financial definitions

Market capitalisation – Share price multiplied by total number of outstanding shares.

Equity per share – Equity divided by the number of shares at year-end.

Attendance – Attendance as a percentage of regular working-hours.

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

Rate of capital turnover (operating capital), multiple – Sales divided by operating capital.

Net investments in property, plant and equipment – Investments in property, plant and equipment, excluding acquisitions of assets and liabilities, less sales and retirements for the year.

Net debt/equity ratio, multiple – Interest-bearing net debt divided by equity.

Sales per employee – Sales divided by the average number of full-time employees.

Operating capital – Total assets less cash and cash equivalents, non-interest bearing liabilities 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 – Operating profit plus financial income 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.

Parent Company Income Statement

SEK 000	NOTE	2017	2016
Net revenue		34,804	31,792
Cost of sold services		–16,629	–16,130
Gross profit		18,175	15,662
Selling expenses		–17,031	–10,992
Administrative expenses		–11,776	–11,187
Other operating revenue	2	869	505
Other operating expenses	3	–1,137	–15,644
Operating profit	4, 5, 6, 15	–10,900	–21,656
Profit from financial items	7
Profit from participations in group companies		69,341	6,576
Interest income, etc.		1,729	6,541
Interest costs, etc.		–1,202	–5,284
Profit after financial items		58,968	–13,823
Appropriations	8	–	–
Profit before tax		58,968	–13,823
Tax	9	–4,657	–4,064
Profit for the year		54,311	–17,887

Parent Company Statement of Other Comprehensive Income

SEK 000	2017	2016
Profit for the year	54,311	–17,887
Other comprehensive income
Items that can be subsequently reversed in the Income Statement:	–	–
Total comprehensive income for the year	54,311	–17,887

Parent Company Balance Sheet

SEK 000	NOTE	31 Dec 2017	31 Dec 2016
ASSETS
Non-current assets
Intangible assets	10
Capitalised expenditure on development work		1,053	1,209
Property, plant and equipment	10	423	239
Financial assets
Participations in group companies	16	221,379	221,429
Receivables from group companies	11	4,925	9,569
Deffered tax assets	9	–	–
Total financial assets		226,304	230,998
Total non-current assets		227,780	232,446
Current assets
Short-term receivables
Receivables from group companies		66,111	43,836
Other receivables	12	1,640	–
Prepaid expenses and accrued income		1,676	1,497
Total short-term receivables		69,427	45,333
Cash and bank balances	17	46,902	34,920
Total current assets
		116,329	80,253
TOTAL ASSETS		344,109	312,699
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		32,557	70,650
Profit for the year		54,311	–17,887
Total equity		249,465	215,360
Current liabilities
Accounts payable–trade		2,288	1,738
Liabilities to group companies		81,313	79,543
Other liabilities		1,270	8,578
Accrued expensed and deferred income	13	9,773	7,480
Total current liabilities		94,644	97,339
TOTAL EQUITY AND LIABILITIES		344,109	312,699

Summary Statement of Changes in Parent Company's Equity

	Restricted equity			Non-restricted equity	Total equity
SEK 000	Share capital	Statutory reserve	Profit brought forward	Profit for the year
Opening equity, 1 Jan 2016	14,436	148,161	77,740	13,121	253,458
Appropriation of profit			13,121	–13,121	–
Comprehensive income
Profit for the year				–17,887	–17,887
Other comprehensive income
–			–	–	–
Total comprehensive income			–	–17,887	–17,887
Transactions with shareholders
Dividend			–20,211		–20,211
Closing equity, 31 Dec 2016	14,436	148,161	70,650	–17,887	215,360

	Restricted equity		Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit brought forward	Profit for the year	Total equity
Opening equity, 1 Jan 2017	14,436	148,161	70,650	–17,887	215,360
Appropriation of profit			–17,887	17,887	–
Comprehensive income
Profit for the year				54,311	54,311
Other comprehensive income
–			–	–	–
Total comprehensive income			–	54,311	54,311
Transactions with shareholders
Dividend			–20,211		–20,211
Closing equity, 31 Dec 2017	14,436	148,161	32,557	54,311	249,465

Parent Company Cash Flow Statement

SEK 000	NOTE	2017	2016
Operating activities	17
Profit before tax		58,968	–13,823
Reversed depreciation		463	244
Other non-cash items		–66,952	16,721
Tax paid		–8,345	–763
		–15,866	2,379
Cash flow from change in working capital
Increase (–)/decrease (+) in trade receivables		–6,637	–15,798
Increase (+)/decrease (–) in trade liabilities		–9,312	9,731
		–15,949	–6,067
Cash flow from operating activities		–31,815	–3,688
Investing activities
Purchase of intangible assets		–155	–588
Purchase of property, plant and equipment		–336	–589
Sale of property, plant and equipment		–	404
Purchase of financial assets		–	–50
Sale of financial assets		40,320	15,397
Cash flow from investing activities		39,829	14,574
Financing activities
Dividends paid		–20,211	–20,211
Group contributions received		25,770	23,865
Group contributions paid		–1,591	–8,013
Cash flow from financing activities		3,968	–4,359
Cash flow for the year		11,982	6,527
Cash and cash equivalents
At beginning of period		34,920	28,393
Cash flow before financing activities		8,014	10,886
Cash flow from financing activities		3,968	–4,359
Cash and cash equivalents at end of period		46,902	34,920

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 on page 48, of the consolidated accounts, subject to the exemptions stated below. These principles have been applied consistently for all years presented, unless otherwise stated.

Subsidiaries

Participations in subsidiaries 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. In previous periods, restatement of these loans to closing day rates was recognised in equity in the fair value reserve. Since 2017, these effects are recognised directly in parent company profit or loss in accordance with the revised principle RFR 2. Figures for the comparative year have been restated in the same way. 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.

Intangible assets

The parent company has begun the process of implementing a new group-wide ERP system. Effective 1 January 2015, the parent company is applying the exemption of RFR 2 that permits expenditure for development, which pursuant to IAS 38 p. 57 should be recognised as an asset in the Balance Sheet, to be expensed in the period that it arises instead. Instead, capitalisation is in the group. Remaining intangible assets in the parent company have estimated useful lives of 10 years.

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

	2017	2016
Exchange gains on trade receivables/liabilities	789	233
Gain on disposal/retirement of non-current asset	72	189
Other operating revenue	8	83
Total	869	505

NOTE 3 Other operating expenses

	2017	2016
Impairment of current asset	–	–14,863
Loss on disposal/retirement of non-current asset	–134	–92
Exchange losses on trade receivables/liabilities	–1,003	–689
Total		–1,137 –15,644

NOTE 4 Auditors' fees and reimbursement

	2017	2016
PwC
Auditing assignment	–443	–470
Auditing in addition to audit assignment	–	–
Tax consultancy	–	–
Other services	–402	–295
Total	–845	–765

NOTE 5 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits	2017	2016
Salaries and benefits	–17,268	–15,131
Pension expenses, defined-contribution plans	–3,521	–3,162
Social security contributions	–7,363	–6,569
Total	–28,152	–24,862

Average number of employees		2017 of which men		2016 of which men
Sweden	13	64%	13	72%

	2017	2016
Division between sexes in management	Share of women	Share of women
Board of Directors	19%	13%
Other senior management 4 (4) people	0%	0%

Salaries, other benefits and social security contributions

		Salaries and benefits (of which bonus)		Social security (of which pension expense)
	2017	2016	2017	2016
Management	–10,447	–9,661	–5,891	–4,945
	(–2,958)	(–1,287)	(–2,099)	(–1,537)
Other employees	–7,587	–6,430	–4,993	–4,786
	(–1,170)	(–222)	(–1,422)	(–1,625)

Management means the Board of Directors and the group management.

NOTE 6 Operating leases

	31 Dec 2017	31 Dec 2016
Lease arrangements payable within one year	1,344	1,198
Lease arrangements payable between one and five years	1,528	2,510
Total	2,872	3,708

Parent company expenses for operating leases were 1,486 (1,300). A significant proportion of operating leases relates to rents for premises. In addition, NOTE is party to lease agreements relating to cars and office equipment.

NOTE 7 Net financial income/expense

Profit from participations in group companies	2017	2016
Capital gain/loss on the sale of shares in group companies	35,626	–22,185
Dividend from group companies	2,385	4,583
Group contributions, received	31,536	25,769
Group contributions, paid	–206	–1,591
Total	69,341	6,576
Interest income etc.
Interest income, group companies	992	1,444
Interest income, other	–	47
Exchange rate differences	737	5,050
Total	1,729	6,541
Interest costs, etc.
Interest costs, other	–7	–247
Exchange rate differences	–861	–4,696
Other	–334	–341
Total	–1,202	–5,284

NOTE 8 Appropriations

	2017	2016
Tax allocation reserve, provision/dissolved for the year	–	–
Total	–	–

NOTE 9 Tax

Reported in Income Statement	2017	2016
Current tax expense (–)/tax revenue (+)
Tax expense/tax revenue for the period	–4,657	–2,761

Deferred tax expense (–)/tax revenue (+)
Deferred tax revenue/expense in capitalised/utilised tax values of
loss carry-forwards	–	–1,303
Total reported tax	–4,657	–4,064

Reconciliation of effective tax	%	2017	%	2016
Profit before tax		58,968		–13,823
Tax at applicable rate for parent company		–22.0% –12,973 –22.0%		3,041
Non-deductible expenses	–0.1%	–43	61.0%	–8,426
Non-taxable revenue	14.2%	8,363	–7.4%	1,019
Tax attributable to previous years	0.0%	–4	–2.2%	302
Tax attributable to dissolution of fair value reserve	–	–	–	–
Total		–7.9% –4,657		29.4% –4,064

NOTE 10 Intangible assets and Property, plant and equipment

	Capitalised expenditure on development work	Equipment, tools, fixtures and fittings
Cumulative cost
Opening balances 1 Jan 2016	878	214
Purchases	588	589
Sales and retirements	–	–342
Closing balance, 31 Dec 2016	1,466	461
Opening balances 1 Jan 2017	1,466	461
Purchases	155	336
Sales and retirements	–	–
Closing balance, 31 Dec 2017	1,621	797
Depreciation
Opening balance, 1 Jan 2016	–88	–147
Depreciation for the year	–169	–75
Sales and retirements	–	–
Closing balance, 31 Dec 2016	–257	–222
Opening balance, 1 Jan 2017	–257	–222
Depreciation for the year	–311	–152
Sales and retirements	–	–
Closing balance, 31 Dec 2017	–568	–374
Carrying amounts
1 Jan 2016	790	67
31 Dec 2016	1,209	239
1 Jan 2017	1,209	239
31 Dec 2017	1,053	423

Depreciation is included in the following

Income Statement lines	2017	2016
Cost of goods sold and services	–232	–162
Selling expenses	–223	–82
Administrative expenses	–8	–
Total	–463	–244

NOTE 11 Long-term receivables

Receivables from group companies	31 Dec 2017	31 Dec 2016
Cumulative cost
At beginning of year	9,569	36,565
Purchase	120	2
Impairment	–	–11,956
Re-payment	–4,764	–15,042
Total	4,925	9,569

NOTE 12 Other receivables

	31 Dec 2017	31 Dec 2016
Tax receivable	1,627	–
Other receivable	13	–
Total	1,640	–

NOTE 13 Accrued expenses and deferred income

	31 Dec 2017	31 Dec 2016
Accrued consulting fees	562	760
Accrued salaries and benefits	4,194	3,915
Accrued social security contributions	2,782	915
Accrued vacation payment	1,863	1,713
Other	372	177
Total	9,773	7,480

NOTE 14 Pledged assets and contingent liabilities

Contingent liabilities	31 Dec 2017	31 Dec 2016
Rent guarantee	–	216
Sureties in favour of subsidiaries	42,568	48,345
Total	42,568	48,561

NOTE 15 Close relations

Close relation	År	Sales 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	2017	–	–	–	–
Company owned by Board member	2016	–	220	78	–

Transactions with 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 8 on page 52.

NOTE 16 Group companies

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

		31 Dec 2017	31 Dec 2016
Subsidiary Sweden/Corporate identity no./Registered office	No. of shares	Carrying amount	Carrying amount
NOTE Components AB, 556602-2116, Stockholm, Sweden	1,000	100	100
NOTE International AB, 556655-6782, Stockholm, Sweden	1,000	100	100
NOTE Järfälla AB, 556749-2409, Stockholm,Sweden	1,000	0	0
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, Stockholm, Sweden	9,000	8,190	8,190
NOTE Skellefteå AB, 556430-0183, Stockholm, Sweden	5,000	16,078	16,078
NOTE Torsby AB, 556597-6114, Torsby, Sweden	30,000	3,000	3,000
Lyckefastigheten 2 i Lund AB, 559081-5261, Lund, Sweden	500	–	50
Subsidiary other/Corporate identity no./Registered office
NOTE Electronics (Dongguan) Ltd, 441900400100981, Dongguan, China	1	47,630	47,630
NOTE Hyvinkää Oy, 1931805-1, Hyvinkää, Finland	80	1,347	1,347
NOTE Pärnu OÜ, 10358547, Pärnu, Estonia	1	26,887	26,887
NOTE UK Ltd, 5257074, Telford, UK	1,850,000	14,237	14,237
Total		221,379	221,429

The participating interest is 100 (100) percent in all companies.

Cumulative cost	31 Dec 2017	31 Dec 2016
At beginning of year	254,466	281,601
Sales	–	50
Divestment	–50	–27,185
Shareholder contributions	–	–
	254,416	254,466
Cumulative impairment
At beginning of year	–33,037	–33,037
Sales	–	–
Impairment for the year	–	–
	–33,037	–33,037
Net carrying amount	221,379	221,429

NOTE 17 Cash Flow Statement

Interest paid and dividend received	2017	2016
Interest received	992	1,491
Interest paid	–7	–246
Dividend received	2,385	4,583

Other non-cash items
Profit/loss on sale of shares in subsidiaries	–35,626	–
Impairment of financial assets	–	42,048
Impairment of current asset	–	–
Group contributions received/paid in the year	–31,326	–24,178
Other items not affecting liquidity	–	–1,149
Total	–66,952	16,721

Cash and cash equivalents	31 Dec 2017	31 Dec 2016
Cash and bank balances	46,902	34,920

Un-utilised credit facilities
Un-utilised credit facilities	45,000	45,000

NOTE 18 Information on the parent company

NOTE AB (publ) is a Swedish-registered limited company with its registered office in Stockholm municipality, Stockholm county, Sweden. The parent company's shares are listed on Nasdaq Stockholm Stock Exchange.

The address of the head office is NOTE AB (publ), Box 1285, 164 29 Kista, Sweden. The corporate identity number is 556408-8770. The consolidated accounts for 2017

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

John Hedberg Kjell-Åke Andersson Johan Hagberg Chairman Board member Board member

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.

Bahare Hederstierna Mikael Norin Christoffer Skogh Board member Board member Board member, Employee representative

Per Ovrén CEO and Board member

Kista, Sweden, 3 April 2018

As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 3 April 2018. 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 26 April 2018.

Our Audit Report was presented on 3 April 2018

Niklas Renström Auditor in Charge Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Auditor's Report

To the General Meeting of the Shareholders of NOTE AB (publ), corporate identity number 556408-8770

REPORT ON THE ANNUAL ACCOUNTS AND CONSOLIDATED ACCOUNTS Opinions

We have audited the Annual Accounts and Consolidated Accounts of NOTE AB (publ) for the year 2017.

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 2017 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 2017 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. The statutory administration report is consistent with the other parts of the Annual Accounts and Consolidated Accounts.

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

Our opinions in this report on the annual accounts and consolidated accounts are consistent with the contents of the complementary report that has been presented to the Parent Company's and the Group's audit committee pursuant to statutory audit regulation (537/2014) article 11.

Basis for opinions

We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, this includes no prohibited services as specified in statutory audit regulation (537/2014) article 5.1 being provided to the audited company, or were applicable, its parent company or entities under its control in the EU.

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

Our audit approach

Scope and focus of audit

We designed our audit by determining materiality and assessing the risk of material misstatement in the consolidated financial statements. We focused on areas where the Managing Director and Board of Directors have made subjective judgments, such as key accounting estimates on the basis of assumptions and forecasts of future events, which are by their nature uncertain. Like for all audits, we also considered the risk of the Board of Directors and the Managing Director overriding internal control, and factors such as whether there is any evidence of systematic departures that have given rise to material misstatement resulting from fraud.

We tailored the scope of the our audit to conduct an expedient examination in order to comment on the consolidated financial statements as a whole, with consideration given to the group structure, accounting procedures and controls, and the industry in which the group operates.

Materiality

The scope and focus of the audit was influenced by our assessment of materiality. An audit is designed to achieve reasonable assurance regarding whether the financial statements are free from any material misstatements. Misstatements may arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

On the basis of our professional assessment, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole. With the help of these and alongside qualitative considerations, we determined the scope and focus of the audit and the nature, timing and extent of our audit procedures, as well as assessing the effect of individual and aggregate misstatements on the financial statements as a whole.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.

Valuation of accounts receivable—trade

We refer to note 23, Financial instruments per category and note 24, Financial risks and finance policy. The NOTE group sells products to a large number of customers worldwide. Its customer base is fairly diverse, with customers in different industrial sectors. The payment terms of customers are dependent on customer-specific circumstances and agreements entered. The value of the stock of outstanding accounts receivable—trade depends on the extent customers will pay. The company's information on individual customers' solvency is limited. According to the accounting policies applied by NOTE, management conducts an individual assessment of all accounts receivable—trade that are due for payment. Based on this individual assessment, a reserve for risks of outstanding accounts receivable—trade is created. These assessments are complex and dependent on several different factors, and accordingly, inherently include a measure of uncertainty.

Our audit approach to the key audit matter when auditing the valuation of accounts receivable—trade

We have evaluated the design and efficiency of specific selected controls in the sales process, the management of accounts receivable—trade and payments from customers. For example, these include creditworthiness checks and reconciliation of accounts receivable balances. We have also reviewed managements' analysis of the progress of days sales outstanding (DSO) and outstanding credit risks. We have also evaluated the processes applied for measuring accounts receivable—trade and randomly selected reserves against the company's decision-support documentation.

In addition to reviewing the controls in the sales process and measurement of accounts receivable—trade, we contacted a selection of customers in writing to confirm outstanding accounts receivable—trade balances. We have also followed up on the payments of a selection of accounts receivable—trade.

Valuation of inventories

We refer to note 15, Inventories. NOTE's production units hold inventories of raw materials and other input goods, products in progress and finished goods manufactured by NOTE.

NOTE has customer-specific manufacture of electronic components based on manufacturing orders and sales forecasts from customers. Based on NOTE's manufacture, customer-specific components include a risk of obsolescence in inventories. NOTE conducts individual assessments of inventories per customer, which considers potential obsolescence. Based on this individual assessment, a reserve is recognised. These assessments are complex and dependent on several factors, and accordingly inherently include a measure of uncertainty.

Our audit approach to the key audit matter

when auditing the valuation of inventories We have evaluated the design and efficiency of specific selected controls in NOTE's processes for procuring raw materials and inventory management.

In addition to testing controls in the procurement processes and inventory management, we have evaluated the company's obsolescence reserve through a random review of details on the company's supporting data for measurement. We have also conducted an in-depth examination through random testing of the pricing of raw materials inventory, computed supplements on products in process and finished goods. We have also examined the inventories of significant units in terms of the time items have remained in inventory.

Other information than the annual accounts and consolidated accounts

This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1–13, 23–25 and 33–35. The Board of Directors and the Managing Director are responsible for this other information.

Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance or conclusion regarding this other information.

In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure, we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.

If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors and the Managing Director

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

In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.

The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things monitor the company's financial reporting.

Auditors' responsibility

Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.

An additional review of our responsibility for the audit of the annual accounts and consolidated accounts is available at Revisorsinspektionen's website: www.revisorsinspektionen.se/ revisornsansvar. This review is part of the audit report.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Opinions

In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of NOTE AB (publ) for the year 2017 and the proposed appropriations of the company's profit or loss.

We recommend to the general meeting of shareholders that the profit (loss) 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.

Basis for Opinions

We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.

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

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. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.

The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among

other matters take measures that are necessary to fulfil the company's accounting in accordance with law and handle the management of assets in a reassuring manner.

Auditor's responsibility

Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:

has undertaken any action or been guilty of any omission which can give rise to liability to the company, or
in any other way has acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.

A further description of our responsibility for the audit of the administration is available at Revisorsinspektionen's website: www.revisorsinspektionen.se/revisornsansvar. This discription is part of the auditor's report.

Öhrlings PricewaterhouseCoopers AB, Stockholm, Sweden, was appointed as audit firm of NOTE AB (publ) by the general meeting of shareholders on 20 April 2017, and has been the company's auditor since 18 April 2008.

Discrepancies between reports

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.

Niklas Renström Authorized Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 3 April 2018

Addresses

NOTE AB (publ) Borgarfjordsgatan 7 164 40 Kista Sweden

NOTE Components AB

NOTE Torsby AB

Borgarfjordsgatan 7 164 40 Kista Sweden

NOTE Hyvinkää Oy Avainkierto 3 05840 Hyvinkää Finland

NOTE Lund AB

Maskinvägen 3 227 30 Lund Sweden

NOTE Norrtelje AB

Vilhelm Mobergs gata 18 761 46 Norrtälje Sweden

Inova Park

NOTE Pärnu OÜ

Laki 2 80010 Pärnu Estonia

685 29 Torsby Sweden

NOTE UK Ltd

Stroudwater Business Park Brunel Way Stonehouse GL10 3SX Gloucestershire UK

NOTE Electronics (Dongguan) Co Ltd

No. 6 Lin Dong 3 Road Lincun Industrial Center Tangxia 523710 Dongguan Guangdong Province China

Website: www.note.eu E-mail: [email protected]

NOTE AB (publ) Annual Report 2017 Corporate identity number 556408-8770 Text and graphic design: NOTE AB (publ). Production: NOTE AB (publ) and Redesign. Images: Jann Lipka. Printing: Billes Tryckeri AB. Translation: Turner Financial Translators Ltd.

AI assistant

NOTE — Annual Report 2017

3087_10-k_2018-04-05_c0f0cc5e-eb83-4323-ba30-9e89c8728512.pdf

Annual Report

Contents

INTRODUCTION

OPERATIONS

SUSTAINABILITY REPORT

THE NOTE SHARE

CORPORATE GOVERNANCE

FORMAL ANNUAL ACCOUNTS

Shareholders' information

Annual General Meeting

Notification

Business

Dividend

Nomination Committee

Financial information

Calendar

Investor relations contacts

Ordering financial information

This is NOTE

Key facts

Earnings per share

CEO's statement

Long-term customer relations and partnerships

Organisation for growth

Continuous improvement, quality and sustainability

2018 and beyond

Vision, business concept, strategy and targets

Vision

Business concept

Financial targets

Profitability target

Dividend target

Values

Committed

Proactive

Quality focused

Business model

A partner with a strong, complete offering

Getting things right from the start creates value-added

Focused rationalisation work

Sustainability

Value-creating partnerships with customers

Hiab—a world leader in on-road load handling

RaySafe reduces the risk of harmful X-rays

RCO creates secure, safe and smooth lives

Market and competitors

Background

The market in 2017

Market trends, customer needs and future prospects

Competitors

Risk management

Sustainability

Timeline of NOTE's sustainability work

Global Sustainable Development Goals

Holistic view enhances business benefit

NOTE's sustainability objective

Environmental policy and working methods

2012

2013

2014

2015

2017

Division between blue collar and white collar workers

Social conditions and human resources

Respect for human rights and anti corruption

UN Global Compact

In 2011, NOTE became one of the first companies in its sector to join the Global Compact, which was started on a UN initiative.

The UN Global Compact's Ten Principles

APPROACH

RESULTS 2017

GOALS 2018

APPROACH

RESULTS 2017

GOALS 2018

APPROACH

RESULTS 2017

GOALS 2018

NOTE Annual Report 2017