Annual Report

INTRODUCTION

This is NOTE	2
CEO's statement	4

OPERATIONS

Vision, business concept, strategy and targets	6
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	26

CORPORATE GOVERNANCE

Corporate Governance Report	28
Group Management	35
Board of Directors	36

FORMAL ANNUAL ACCOUNTS

Report of the Directors	39
Five-year summary	43
Consolidated Financial Statements	46
Notes on the Consolidated Financial Statements	50
Parent Company's Financial Statements	64
Notes on the Parent Company's Financial Statements	68
Auditor's report	73

Shareholders' information

Annual General Meeting

The AGM (Annual General Meeting) will be held at 2:00 p.m. on Thursday, 23 April at Spårvagnshallarna, Stockholm, Sweden. Information on the notification procedure for the Meeting will be uploaded to the website jointly with the invitation by no later than four weeks prior to the Meeting.

Notification

Shareholders intending to participate in the AGM must be recorded in the share register maintained by Euroclear Sweden AB by 17 April, and notify NOTE of their intention to participate by no later than 17 April.

Business

Information on the agenda of the AGM is published in the Swedish Official Gazette and will be available on NOTE's website.

Documentation is also available from NOTE coincident with notification of intention to participate at the Meeting.

Dividend

The Board of Directors is proposing that dividend of SEK 1.20 (0.70) per share is paid to shareholders for the financial year 2019.

Nomination Committee

The Nomination Committee has the following members:

Johan Hagberg, own holdings

Martin Nilsson, Catella Fondförvaltning

Niklas Johansson, Handelsbanken fonder

Thomas Tang, Mediuminvest A/S

Financial information

Calendar

Interim Report, Jan–Mar 23 Apr 2020 Interim Report, Jan–Jun 16 Jul 2020 Interim Report, Jan–Sep 22 Oct 2020

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 (electronics manufacturing services) partners in northern Europe. NOTE manufactures high end electronics on assignment from customers at eight 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 manufacturing, communication, medtech, defence 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.
Average number of employees 2019: 1,070
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).

Overview, SEK million	2019	2018	Delta
Net revenue	1,760	1,379	381
Operating profit	124	84	40
Operating margin,	7.1%	6.1%	1.0%
Profit before tax	116	79	37
Profit for the year	92	64	28
Cash flow after investments and acquisition	75	–76	151

Earnings per share before dilution

Cash flow per share, after investments and acquisition

CEO's statement

2019 was another strong year for NOTE, when we increased sales by 28%. Operating profit and cash flow were at record levels. After successful new business sales, our order book expanded sharply.

Our historically best year ever

Our stated growth target is to increase market shares and achieve minimum steady yearly growth of 10%. In 2019, we increased sales by 28% to SEK 1,760 million, our highest-ever level. Adjusted for the sales of Speedboard Assembly Services of the UK, which we acquired in the fourth quarter 2018, growth was 17%. We reported growth on all domestic markets, and from all plants. I'm also delighted that our organic growth increased to 20% in the fourth quarter.

Our order books kept expanding, and were about 25% larger than at the previous year-end. We're confident about the future, and are now maintaining the tempo necessary to be one of the fastestgrowing companies in our sector.

Our business model builds on longterm customer relations and partnerships. Continuously developing the quality and delivery precision of our services is a critical success factor—and here, we're now setting a sector-leading standard. NOTE has a strong customer base, and we partner with several of the Nordic leaders across a broad spectrum of sectors, in traditional industries, and new, expansive application segments. We still have great potential to expand our current business. Consistent with our growth plan, we successfully expanded our partnerships with several major customers, making a significant contribution to our growth in the year. One clear example is our growing sales to Swedish safety helmet manufacturer Hövding, which more than doubled in the fourth quarter. Additionally, one of our largest customers in China gave us its Best Quality Award, while

also deciding to significantly expand its partnership with us in 2020.

We're seeing high interest in our flexible and industrially broad-based customer offering. By focusing on the market and technology segments where we're already strong, we secured a lot of new business customers in the year. New partnerships offering high future potential include those with DeLaval, Maven Wireless and several new and exciting communication and medtech customers. We're about to start up batch production and increasing volumes on more deals than ever, which feels reassuring for our future.

In earnings terms, our positive trend continued. Adjusted for non-recurring expenses relating to our change of CEO in 2018, operating profit increased by 37% to SEK 124 million. Measured in the same way, our operating margin widened by 0.5 point five percentage points to 7.1%, which in both cases, are our highest-ever levels. Our return on operating capital was over 20%, and thus above our externally communicated profitability target. Our earnings increase has several reasons, including higher sales, stable margins on customer assignments, restructuring programmes executed, and the strong progress of our Western European business, especially in Sweden and Finland.

Efficient management of working capital is an important success factor in our sector. In the first half-year we faced major challenges with high capital tied-up in inventory. This was primarily an effect of growth, a lot of major projects in start-up and difficult conditions on the global market for electronic components. But with resolute action, we succeeded in significantly reducing our inventory in the second half-year, and by year-end, working capital was in better balance. Cash flow for the full year was SEK 75 million.

We also invested in continued growth in the year, both in terms of skills and performance-enhancing investments in our machinery. NOTE is well equipped in terms of its finances and capacity to keep growing. Our liquidity is healthy, and our equity to assets ratio is just over 41%.

Sustainability issues are playing an increasing role in our lives, personally and professionally. In my view, we've addressed these challenges methodically and responsibly. One of NOTE's strengths is that we were one of the first companies in our sector to join the UN Global Compact and adopt its ten principles on human rights, labour law, the environment and anti corruption back in 2011.

Future

The implementation of restrictions to global trade is causing customers to increasingly realign their supply chains from East to West. With our strong positioning in Europe, we actually see more opportunities than risks in this transition.

Due to the spread of the coronavirus, we extended the closure of our plant in China after the Chinese New Year. But the plant has been running at 100% capacity since 1 March, and to catch up with the backlog that arose due to the extended downtime, our staff will be working overtime. We're in close dialogue with key suppliers to avoid delivery disruptions as far as possible.

To sharpen our competitiveness, we've increased the pace of our rationalisation work and capacity-increasing investments.

We see good potential for continued strong progress in the near term. However, we are seeing a slowdown in our business environment, and the longer-term outlook is harder to assess, even if our customer forecasts do indicate the strong progress continuing. We are monitoring future progress of the corona situation and its impact on NOTE, our customers and suppliers closely, and with great humility.

Johannes Lind-Widestam

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 collaborative 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 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 electronics-based 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 the 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 conditions are optimal.
A strong financial position.

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%. 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 to assets ratio should be 30%.

Dividend policy

Each year, the Board of Directors will be evaluating the level of dividends it views as optimal for the year. This can be distributed to shareholders in the form of dividends and/or share buy-backs. Future dividends should primarily be adapted to NOTE's investment requirement and financial position.

NOTE's values

Committed

"We make it work." We are solution oriented, driven and provide a stimulating working environment, internally and for our customers.

Proactive

We endeavour to do business on a proactive, clear and sustainable footing.

Quality focused

"Get it right from the start." There is quality focus in everything we do.

Flexible

We always strive to satisfy customer demand, and adjust 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's 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. Products are often embedded in customers' end-products, such as control systems, sophisticated communication equipment and various types of

measuring instrument. 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, qualityassured process and effective interplay between its central sourcing function and local sourcing departments at each plant. NOTE operates an established partnering model, which brings skills to segments such as mechanical engineering,

plastics, cabling and displays, to ensure competitiveness in box build manufacture.

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.

NPI = 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.

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 until a product reaches final markets, reducing capital tied up, and realising a competitive edge on the market for the customer.

Focused rationalisation work

By delivering the right quality at the right time at an advantageous total cost, competitiveness is created. In recent years, NOTE has achieved an industryleading position in terms of quality and delivery precision. Within the framework of NOTE's efficiency efforts, the services are constantly being developed to meet customers' demands and expectations. This work is conducted locally at each plant, and through a variety of groupwide 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.

ISO 9000 is a family of international standards that are the foundation of NOTE's quality work. All NOTE plants hold ISO 9001 certification. Half of NOTE's 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.

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	SPEEDBOARD ASSEMBLY SERVICES LTD	NOTE PÄRNU OÜ	NOTE ELECTRONICS (DONGGUAN) CO LTD
ISO 9001	•	•	•	•	•	•	•	•
ISO 13485	•	•	•					•
ISO 14001	•	•	•	•	•	•	•	•
OHSAS 18001/ ISO 45001				•			•	•
	Sweden	Sweden	Sweden	Finland	UK	UK	Estonia	China

ISO 9001: A standard for management system.

ISO 13485: Standard for medtech.

ISO 14001: Standard for environmental management.

OHSAS 18001/ISO 45001: Standard for work environment.

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 Laerdal and Vicon–just two of NOTE's 300-plus customers.

Laerdal Medical - a world leading provider of training, educational and therapy products for lifesaving and emergency medical care.

Laerdal has been a NOTE customer since 2019. The Norwegian company partners with many global companies and organisations – for example the American Heart Association, British Heart Foundation and Philips Healthcare.

The production will initially take place in China. NOTE will manufacture PCBA's and ship the products to various Laerdal

units in Asia and Europe. NOTE will provide NPI, logistic and test services.

"Working with NOTE in the last few months has been really good. NOTE's team has been supportive and understanding to the needs. They understand our initiative as a customer and tend to support us each time. The team tends to look for the best ways to

reduce the costs without compromising on the product quality. We look forward to see this co-operation grow with time," says Deepak Gajjala, Global Category Manager at Laerdal Medical A/S.

Vicon Motions Systems – world leader in motion capture solutions

Located in Oxford, United Kingdom, Vicon have been working with NOTE in Windsor since 2011, for 2 generations of its highly successful camera products.

Vicon is the leading developer of motion capture products and services for the life sciences, virtual reality, entertainment and engineering industries. Processes used have included prototyping, NPI and volume production and the supply of fully tested board solutions using a bespoke Kanban system*. NOTE helps Vicon with the whole process, and currently manufactures the 2 camera family, Vantage and Vero.

Nick Japhtha, Supply Chain Manager for Vicon comments, "NOTE in Windsor have been a key supply partner to our business. The quality and supply of board assemblies is critical to the success of our business. By working together we have ensured that product is always available when our customers need it."

* Kanban is a workflow management method designed to help you visualise your work, maximise efficiency and be agile.

Market and competitors

NOTE is active on the market for outsourced EMS, which is continuously evolving due to the growing technology dependence 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 far lower cost levels. This has influenced the structure and evolution of the European market.

The majority of market participants in Europe are domestic, smaller enterprises. They are often linked to 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 specialised services, while the value created by providers in Eastern Europe is primarily cost driven. However, the trend is towards evening out the discrepancies between these regions.

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 desire to cut costs and capital tied-up.

The market in 2019

The European market for outsourced EMS continued to progress positively. The market in China was negatively impacted by extended restrictions on global trade.

Consequently, many international customers decided to migrate supply chains from East to West, or to countries outside China. However, the impact on NOTE was very limited. Instead, most of the customers of our plant in China decided to transfer production to one of NOTE's European plants. Overall, this contributed to brisk progress on several of NOTE's domestic markets in Sweden, Finland and the UK. The demand for EMS at NOTE's Estonian plant 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, localisation to consider trade barriers and robust economic progress in growth regions, with the resulting emergence of new end-user markets. Going forward, it is likely that important factors will remain the search for cost-efficient production, rationalisation, as well as continued production migration. Where previously, migration was mainly from West to East, in recent years, NOTE is witnessing growing interest in production close to end-customer markets, for reasons of sustainability and total cost. Additionally, many products are now

manufactured with a greater automation content, so countries such as Sweden are progressively sharpening their competitiveness as products involve less manual work. Closeness to customer development centres and the greater flexibility this brings is another trend also driving volumes in the low-end to midrange segments into Europe. Customer satisfaction surveys conducted in recent years reveal that flexibility and closeness in partnering are important to NOTE's customers. Customer satisfaction surveys also indicate the demand for more sophisticated technology to reduce leadtimes from idea to finished product. The demand for tailored logistics solutions is rising, to improve flexibility and reduce capital tied-up.

The European market for electronics production is forecast to grow by some 3% per year in 2020–2023. NOTE is witnessing growing interest from customers to locate manufacture in Europe, which benefits NOTE, because most of its capacity is in this region.

Competitors

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

Risk management

OPERATIVA RISKER OPERATIONAL RISKS OPERATIVA RISKER
RISK	EXPOSURE AND MANAGEMENT	RISK	EXPOSURE AND MANAGEMENT
NOTE has a large number of active accounts, the 15 Customers The risk that a customer largest in sales terms represented 45% of its sales in leaves NOTE or does not 2019. In most cases, NOTE manufactures a range of fulfil its obligations. 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, as well as corruption.	Certain materials are manufactured by suppliers or sub-contractors in countries where there are risks of shortcomings in occupational health and safety, as well as corruption. 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, so sales variations can be significant for individual customers. Usually, materials risk is regulated by 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 harm the environment, and costs for complying with new, more stringent environmental directives.	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 create capacity challenges in the group's plants.	Liability Risks in addition to the above sustainability	NOTE's role includes it being a collaborative partner for customers, but not a product owner. This means that materials selection and production are in accordance
Materials Price and access to materials.	The pricing of, 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.	and environmental risks where NOTE may be liable for claims 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 NOTE has inventories corresponding to some 20% of sales. The risk of components Sourcing on customers' behalf is normally formalised and production materials through agreements with customers. Considering the not being consumed, and complexity of EMS and variation in demand, NOTE			NOTE's insurance cover is assessed to be reasonable and is adapted to operational risks. Where possible and financially viable, there is insurance cover that is appropriate for operations.
thus losing value.	collaborates closely with customers to limit the risk of obsolescence in inventories. Obsolescence risk is monitored continuously.		FINANCIAL RISKS
Cyclical and seasonal	NOTE sells to a large base of customers active in
manufacturing, communication, medtech, defence and variations high-end consumer electronics. Usually, customers outsource all their electronics production to one or more EMS partners. Accordingly, NOTE's manufacture is never for capacity reasons or to supplement customers' in house resources. Deterioration of the global economy, or a demand downturn on NOTE's major markets, would risk impacting NOTE's sales and earnings.		RISK Currency The risk that a fluctuation in exchange rates affects the group's profit, cash flow or Balance Sheet negatively.	EXPOSURE AND MANAGEMENT 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 forwards and similar instruments.
Production downtime Downtime in production affecting deliveries to customers and causing extra costs.	Because NOTE conducts high end manufacture of electronics, it is subject to stringent 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	Financing The risk that refinancing loans is more difficult or costly, and that accordingly, NOTE's solvency is negatively affected.	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.
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 consequential losses caused by production downtime.	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 (group) represents more than 6% of sales. In terms of NOTE's business setup, there are some individual customers that do create fairly high exposure in accounts receivable–trade and inventories, including
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 skills development.		outstanding purchase orders. If these customers' solvency deteriorated, this could have an adverse impact on NOTE's earnings. NOTE evaluates and credit checks new and existing customers. Ongoing financial reporting includes close monitoring
IT IT-related disruptions can cause production downtime, loss of invoicing and/or reduced efficiency in administration and sales.	NOTE's operations require highly functional IT systems. NOTE has a selection of local applications and operating environments with varying functionality and capacity. Following a far-reaching, group-wide project, a shared, business-specific ERP system has been introduced at all NOTE plants in Sweden, Estonia and Finland. This is a key step in realising the ambition of further harmonising internal processes and systems support group wide.		of accounts receivable–trade and inventories, including outstanding purchase orders.

NOTE works continuously to improve its IT security.

Sustainability

A sustainable business operation is the key to long-term success. NOTE works continuously 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
The plant in Norrtälje,	The plant in Torsby,	The plant in Lund,
Sweden, ISO 14001	Sweden, ISO 14001	Sweden, ISO 14001
certification.	certification.	certification.

Code of conduct produced.

2006

2010 The plants in UK and China ISO 14001 certification.

2011 NOTE joins UN Global Compact.

Global Goals for Sustainable Development

NOTE has been a member of the UN Global Compact since 2011, and supports its ten principles on human rights, labour law, the environment and anti corruption. We have also analysed which of the UN's 17 Sustainable Development Goals NOTE can contribute to through its operations. The connections between these goals and NOTE's activities, targets and strategies are reported on the pages stated in the contents to the left.

NOTE and sustainability

A growing number of stakeholders expect NOTE to make a contribution to sustainable development. These expectations apply to responsible business, transparency and good business ethics, but also to NOTE developing environmentally adopted production processes. NOTE's sustainability work involves all group companies, covering everything from appropriate conduct towards the company's stakeholders and helping customers choose components and technologies with good environmental and quality performance, to locating manufacture close to final markets, and limiting the environmental impact of transportation as far as possible.

In tandem with improving our impact on the environment and wider society, NOTE endeavours to act responsibly on those markets where it is active. Sustainability issues are included in our yearly customer satisfaction surveys, to identify segments that customers consider important to focus on.

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 longterm, sustainable development by manufacturing with the minimum possible environmental impact. NOTE endeavours 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.

The group's manufacturing units hold ISO 14001 environmental certification and are audited by internal and external resources. In 2018, NOTE acquired a plant in Windsor, UK, which had already been working on environmental issues pursuant to ISO 14000 for many years and was certified in January 2020. NOTE was one of the earliest companies in its sector to receive ISO 14000 environmental certification, back in 1997.

Despite differences in environmental legislation between countries, NOTE has the consistent ambition of all its plants following a consistent line of environmental work. Its manufacturing units exchange best practice, bestin-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 in other parts of its business, through

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. 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.

2018

channels including discussions with its customers on sourcing materials and production setups.

Electronic scrap, glass, plastic and paper are recycled. NOTE conducts improvement projects to reduce waste, energy consumption and CO2 emissions. Corrugated board and combustible waste are compacted to minimise the amount of waste transports, which affect the environment. In its transport, NOTE also coordinates its freight agreements to optimise transportation, and thus limit energy consumption and CO2 emissions.

NOTE conducts regular environmental audits of strategic suppliers.

Social conditions and human resources

NOTE endeavours to be an employer offering everyone equal opportunities to work and develop. The group's collective competence is based on diversity, which helps bring 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, which had one reported case resulting in action being taken in the year. NOTE implemented a Privacy policy in 2018, which regulates the management of personal data. This policy is written according to the EU GDPR (General Data Protection Regulation).

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

14 work-related incidents were reported in 2019, and 2 work injuries, which resulted in a total of three and a half days' sick-leave.

NOTE conducts an annual employee satisfaction survey, and in 2019, the response frequency was 80% (82% in 2018).

Respect for human rights and anti corruption

NOTE respects human rights and its conduct prevents them being infringed. In addition to 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, for example.

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.

Within the auspices of its internal controls, NOTE has a documented process for evaluating risk and compliance with policies. In 2020, NOTE intends to continue 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.

Gender division group

Gender division managers

Gender division Board of Directors

UN Global Compact

NOTE has been a member of the Global Compact, which was started on a UN initiative, since 2011.

The 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 COP reviews its actions, approach and goals. NOTE has been at the Participant level since 2019. Each year, NOTE makes a sales-based donation to the UN Global Compact.

NOTE's Code of Conduct is based on the Global Compact's ten principles and the full version is available on its website. A summary of our plants' executed and forward-looking work on Global Compact principles follows.

PRINCIPLE 1: BUSINESSES SHOULD SUPPORT AND RESPECT THE PROTECTION OF INTERNATIONALLY PROCLAIMED HUMAN RIGHTS

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.

RESULT 2019

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 three strategic or contracted suppliers (three in 2018), who accepted NOTE's Code of Conduct or have their own, equivalent code.

NOTE conducted follow-up audits on 24 suppliers (35 in 2018) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact.

The form used for supplier audits included questions regarding human rights.

The share of sourcing from strategic and contracted suppliers is approximately 56% (55% in 2018).

In 2019, NOTE supported WaterAid, an organisation whose mission is to improve living conditions for the world's poorest and most marginalised people by improving access to clean water, toilet and hygiene facilities. Access to clean water is critical to reduce poverty. It increases equality by freeing up time for women for work and education. It also reduces infant mortality and improves public health by improving the prospects for maintaining good hygiene.

GOALS 2020

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 two percentage points.

Work to help children and uphold their rights, by donating to development organisations.

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

APPROACH

NOTE has been applying 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.

RESULT 2019

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's customers demanded for materials analysis, and continued its work on reducing the usage of conflict minerals by helping customers select materials, to avoid this type of material.

GOALS 2020

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

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 in most NOTE plants. NOTE's Human Rights policy states the group's internal standpoints on this principle.

Three plants also use OHSAS 18001/ISO 45001 as guidance for their work. This is a far-reaching, global and verifiable standard in occupational health and safety, with external auditing and certification.

RESULT 2019

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 importance of these issues.

A fourth plant has decided to affiliate to the updated health & safety standard ISO 45001 (previously OHSAS 18001) and will begin the certification process in 2020.

NOTE signed agreements with another three strategic or contracted suppliers (three in 2018), who accepted NOTE's Code of Conduct or have their own, equivalent code.

NOTE conducted follow-up audits on 24 suppliers (35 in 2018) 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 is approximately 56% (55% in 2018).

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

GOALS 2020

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.

One plant secured ISO 45001 certification, and those plants with OHSAS 18001 certification will continue their work on converting to the new, updated ISO 45001 standard.

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 two 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.

RESULT 2019 AND GOALS 2020

See principle 3.

Samma som för Princip 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.

RESULT 2019 AND GOALS 2020

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 climate should feature respect and tolerance. If any instances of harassment or bullying are reported, the group will take action immediately.

RESULT 2019

NOTE conducted a group-wide employee satisfaction survey in the year, whose results are utilised in NOTE's forward planning and development work. In 2019, one whistleblower case resulted in action

being taken.

NOTE works 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 three strategic or contracted suppliers (three in 2018), who accepted NOTE's Code of Conduct or have their own, equivalent code.

Follow-up audits were conducted on 24 suppliers (35 in 2018) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact.

The results of these audits indicate that suppliers are complying with relevant laws and regulations.

The share of sourcing from strategic and contracted suppliers is approximately 56% (55% in 2018).

GOALS 2020

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 two 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. 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 develop and improve in this segment.

RESULT 2019

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

Selective soldering machines have been installed, reducing tin slag, and enabling a more environmentally friendly process than previously.

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 at manufacturing units to save energy. Timers have been installed at certain plants to ensure lighting is not used unnecessarily.

In 2018, NOTE acquired a plant in Windsor, UK, which had already been working on environmental issues pursuant to ISO 14001 for many years and was certified in January 2020.

NOTE's complete REACH-EU Regulation policy, stipulating how NOTE works to comply with this EU regulation for handling chemicals, is available at its 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 three strategic or contracted suppliers (three in 2018), who accepted NOTE's Code of Conduct or have their own, equivalent code.

Follow-up audits were conducted on 24 suppliers (35 in 2018) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact. The results of these audits demonstrate that suppliers are complying with relevant laws and ordinances.

The share of purchasing from strategic and contracted suppliers is approximately 56% (55% in 2018).

GOALS 2020

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

ISO 14001 certification of the Windsor plant.

Implement Grön El ('Green Power') from solar, wind, hydro and biogas.

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 two 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.

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.

RESULT 2019 AND GOALS 2020

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. 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. A database for identifying RoHS, Reach and conflict minerals in components is being used. 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 develop and improve in this segment.

RESULT 2019 AND GOALS 2020

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, as well as a

Whistleblower policy and 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 low value.

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

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

RESULT 2019

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

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 three strategic or contracted suppliers (three in 2018), who accepted NOTE's Code of Conduct or have their own, equivalent code.

Follow-up audits were conducted on 24 suppliers (35 in 2018) that had previously accepted NOTE's Code of Conduct and the ten principles of the UN Global Compact.

The results of these audits demonstrate that suppliers are complying with relevant anti corruption laws and ordinances.

The share of purchasing from strategic and contracted suppliers was approximately 56% (55% in 2018).

GOALS 2020

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 two percentage points.

SHARE OF SOURCING FROM STRATEGIC SUPPLIERS

In dialogue with our stakeholders, we're endeavouring to create a more sustainable business environment. Applying the UN Global Compact and its ten principles guides us in our operations, as described in our Communication on Progress.

Johannes Lind-Widestam, CEO and President

Human resources

NOTE's employees are the key to our successes. Their commitment, inventiveness and desire to help customers creates the strength of our global business.

NOTE possesses a global organisation with operations in Sweden, Finland, the UK, Estonia and China. Consequently, developing the interaction between plants is important. 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. The average number of employees was 1,070 in 2019. Staff turnover was 20.7% in the group overall, of which 12.0% was in the European plants.

Training

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

NOTE offers opportunities for university and college students to write their dissertations and serve internships.

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. Another ambition of this award is to make an extra contribution to a stronger feeling of solidarity within the group and share real

examples of how our employees conduct themselves when they perform at their best, for customers or colleagues.

A winner is selected each year, and in 2019, the Employee of the Year was awarded to the production team at Stonehouse, UK.

Johnny Goncalves received a special award for his efforts for NOTE's business. Meet some of NOTE's employees in the next section.

Average number of employees

1,070

Average number of employees by country

Employee satisfaction survey

As in previous years, an employee satisfaction survey was distributed to the group's staff, who responded. It is important that every employee feels that they can deliver value-added to customers, understand how to achieve this, and why. Plans of activities, with a schedule for execution, based on responses was created. The results are also utilised for NOTE's future planning and development work.

For more information on human resources, refer to page 42 of the formal annual accounts.

NOTE's 20-year anniversary

NOTE celebrated its 20-year anniversary in 2019. A journey that has involved international expansion, and now, a presence in five countries with eight plants.

Division between blue collar and white collar workers

We've gradually expanded our global presence, maturing as a business. Now, we have plants that are strong individually, and interact well. We've improved our diversity. I'm also delighted to see that based on the results of our employee satisfaction survey; our people think we're continuing to improve as an employer.

Johannes Lind-Widestam, CEO and President

Supak Andersson

SMD/Prototype Operator, Lund, Sweden

Supak joined NOTE 22 years ago, and over the years, her duties have become increasingly advanced, which has been a contributor to her personal development.

"What I like most about my job is the opportunity to develop, and the variation of duties," she says.

Her duties include programming/optimisation and operation of AOI (automated optical inspection), and inspecting, soldering and repairing PCBs in batch production and prototyping. Supak maintains high quality and efficiency, and is always looking to satisfy customer needs, which was a contributor to her winning Employee of the Month in the year.

Supak really appreciates her colleagues, and views them as an important reason that NOTE is a good employer.

"NOTE is also a stable company offering a lot of opportunities, such as continuous development," she concludes.

Monika Lille

In-house trainer, Pärnu, Estonia

The role as an in-house trainer includes training employees, meaning that Monika develops the programmes for workers, the production of training materials and then manages the training of employees.

"I coordinate a job-based training mentoring programme within my competencies. For example, this includes occupational safety, health and a complete training programme for electronics product developers", she says.

Monika's teaching skills have made her a valued colleague. She has worked at NOTE for 15 years. According to Monika, NOTE has many good qualities as an employer.

"NOTE has a competent management team, which helps the employer to become better. A good employer like NOTE values and recognises its employees, by enabling them to develop and grow within the company. A safe working environment is prioritised, which contributes to the employees' health and security", Monika says.

What she likes most about her job is the variety in her work, communicating with different people and supporting the employees in their professional development.

Eini Andersson

Production Supervisor, Hyvinkää, Finland

"No two days are alike. Production planning means a lot of work in a short time, so my days are busy. That's what I like most about my job," Eini says.

The role involves everything after the SMD process including Through Hole Assembly, Hand Soldering, box build, testing and packing. One of Eini's most appreciated qualities is that she is not afraid to solve a problem, which is an important part of her role.

New computer systems have changed her job. The learning process involves a lot of thinking, and Eini views it as a part of her development.

"We've gained new customers during my 4.5 years at NOTE, and I've grown with our customers in my role," she says.

According to Eini, NOTE is a good employer. It's a stable company, offering their employees good benefits and flexible working hours.

"My colleagues are nice, and the atmosphere is open. NOTE is so good that I drive 43 km each way every day to come here," she concludes.

Johnny Goncalves

Technical Project Manager, Norrtälje, Sweden

Johnny has brought his exceptional personal commitment to help one of NOTE's medtech customers to continue development of its product and NOTE's production process to support it in the NPI phase.

Johnny has ensured that we stuck to demanding schedules and critical processes through the project, with his efforts vindicated by an order of some SEK 25 million from the customer. Management wants to say a big thank-you to Johnny for his efforts.

Neville Whitham

Managing Director, Stonehouse, UK

Neville has, in a meritorious and competent way, upgraded the plant in Stonehouse to a level that we as management for NOTE can be proud of. The work has been carried out in an engaging and enthusiastic way with the entire group in Stonehouse being involved in the transformation.

The response from our customers during the relaunch of the plant in September reinforces the image that the upgrade has all the prerequisites to lead to more business, both with new and existing customers. As a result, the entire production team was named employee of the year.

NOTE is a stable company offering a lot of opportunities for continuous personal development. Supak Andersson, NOTE Lund

Auditor's report on the statutory sustainability report

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

Engagement and responsibility

It is the board of directors who is responsible for the statutory sustainability report for the year 2019 on pages 14–23 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our examination has been conducted in accordance with FAR's auditing standard RevR 12 The auditor's opinion regarding the statutory sustainability report. This means that our examination of the statutory sustainability report is substantially different and 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.

Opinion

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.

Niklas Renström Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 20 March 2020

Share data and shareholders

NOTE's share price rose by 85% in the year.

Share price performance

NOTE's share price was SEK 39.45 (21.35) per share at year-end. The high in the year was SEK 41.50, on 22 November. The low of the year of SEK 20.75 was on 2 January. The stock exchange OMX Stockholm Small Cap PI index increased by 22% in the year.

At the end of the year, NOTE's market capitalisation was SEK 1,139 (616) million. The number of shareholders increased by 21%, to 4,560 (3,770) at year-end.

Turnover

11,221,298 NOTE shares were traded on the Stockholm Stock Exchange in 2019, corresponding to a rate of turnover of 40%. An average of 44,885 shares were traded per day.

Dividend policy

For the financial year 2019, the Board is proposing a dividend of SEK 1.20 per share, or SEK 33 million, for payment to shareholders.

Trading

Listing:	Nasdaq Stockholm
Segment:	Small Cap
Sector:	Industrial Goods & Services
Ticker symbol:	NOTE
ISIN code:	SE0001161654
No. of shares as of
31 December 2019:	28,872,600

10 largest shareholders as of 31 December 2019, by holding

Name		No. of shares Proportion of capital/votes, %
Johan Hagberg	5,861,404	20.30
Catella Fondförvaltning	2,326,789	8.06
Handelsbanken fonder	1,703,764	5.90
Mediuminvest A/S	1,440,000	4.99
Tredje AP-Fonden	1,200,000	4.16
NOTE AB (publ)	1,000,000	3.46
Kjell-Åke Andersson with family	865,000	3.00
Nordnet Pensionsförsäkring AB	722,025	2.50
Claes Mellgren	722,000	2.50
Avanza Pension	696,001	2.41
Total	16,536,983	57.28

Division by size, holdings by shareholder as of 31 December 2019

Size of holding	No. of shareholders		No. of shares Proportion of capital/votes, %
1–500	2,887	443,118	1.53
501–2,000	1,045	1,174,734	4.07
2,001–5,000	329	1,099,107	3.81
5,001–20,000	205	1,904,622	6.60
20,001–50,000	45	1,512,360	5.24
50,001–500,000	35	4,567,439	15.82
500,001–5,000,000	12	12,316,816	42.66
5,000,000 –	1	5,861,404	20.30
Total	4,560	28,872,600	100.00

Incentive programmes

An EGM in January resolved on a three-year incentive programme based on 400,000 share warrants for the company's CEO. Pricing was on market terms and the exercise price is SEK 29.20 per share.

Some warrants issued within the incentive programme introduced in 2017- 2018 were repurchased in the year. Given full exercise of outstanding warrants as of year-end, a total of 1,111,000 shares could be issued, or just under 4% of the total number of outstanding shares and votes.

Redemption of treasury shares

A repurchase programme involving a total of 1,000,000 treasury shares was executed in December 2018. The Board intends to propose to the AGM in April 2020 that these shares are cancelled. This would reduce the number of outstanding shares by just over 3%.

Share price 2015–2019

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 provisions 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. They include stipulating that the Board of Directors should consist of a minimum of three and a maximum of ten ordinary members. Resolutions on amending the Articles of

Association may be passed by Annual or Extraordinary General Meetings.

Shareholders

At the end of 2019, NOTE had one shareholder, Johan Hagberg, representing more than 10% of the shares of the company. Johan Hagberg represented 20.3%.

For more information on the share and shareholders, see the NOTE share on pages 26–27.

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

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.

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 prior to the Meeting.

Resolutions of the Meeting are published after the Meeting in a Press Release and the minutes of the Meeting are 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 Board members and CEO from liability, electing Board members, the Chairman of the Board and Auditors, and approving the guidelines for remunerating senior management and fees for the Board of Directors and Auditors.

Extraordinary General Meeting 2019

An EGM on 21 January 2019 elected Anna Belfrage, Kaj Falkenlund, Claes Mellgren and Charlotte Stjerngren as Board members. Johannes Lind-Widestam simultaneously left the Board, which then has seven Board members elected by shareholders' meetings, with Johan Hagberg serving as Chairman. The Meeting also resolved on a three-year incentive programme based on 400,000 share warrants for the company's CEO and President.

Annual General Meeting 2019

NOTE's AGM was held on 25 April 2019 at Spårvagnshallarna in Stockholm, Sweden. Shareholders representing a total of 58.2% of the capital and votes attended the Meeting. The Meeting resolved on matters including re-electing Kjell-Åke Andersson, Anna Belfrage, Kaj Falkenlund, Johan Hagberg, Bahare Hederstierna, Claes Mellgren and Charlotte Stjerngren as Board members for the period until the next AGM is held. Johan Hagberg was elected Chairman. The AGM also approved fees in accordance with the Nomination Committee's proposal.

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 2019 resolved that the Nomination Committee for the forthcoming AGM shall be formed by the four largest shareholders that wish to participate, each appointing a representative at least six months prior to the AGM, with the Chairman of the company's Board of Directors serving as convener.

If one or more of the shareholders waives its right when Nomination Committee members are to be appointed, the next largest shareholder is then offered the corresponding opportunity.

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

Election of a Chairman of the Meeting.
Election of the Chairman of the Board and Board members.
Directors' fees for the Chairman, other Board members and remuneration for Committee work.

Nomination Committee members for the AGM 2020

Committee member	Share of capital/votes, 31 Dec 2019, %
Johan Hagberg, personal holdings	20.30
Martin Nilsson, Catella Fondförvaltning	8.06
Niklas Johansson, Handelsbanken fonder	5.90
Thomas Tang, Mediuminvest A/S	4.99

Election and remuneration of the external Auditor.
Resolution on principles of composition of the Nomination Committee for the next AGM.

As part of its work, for the AGM 2020, the Nomination Committee has considered the appraisal of the work of the Board in the year. Proposals for new Board members have been prepared, which also consider NOTE's Diversity policy.

The Nomination Committee's proposed Board members, 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 2020.

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 Board members. The overall purpose is to identify Board members 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 Board member 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 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 segregation of duties 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 evaluation of the work of the Board, which is conducted through a survey provided to all Board members. The results are compiled and discussed

Board of Directors 2019			Attendance statistics
Board member	Position	Board meetings	Remuneration Committee	Audit Committee
Johan Hagberg	Chairman	6/6	2/2	–
Kjell-Åke Andersson	Member	6/6	-	1/1
Anna Belfrage	Member	5/6	-	3/3
Kaj Falkenlund	Member	4/6	-	–
Bahare Hederstierna	Member	5/6	2/2	-
Claes Mellgren	Member	4/6	-	–
Charlotte Stjerngren	Member	6/6	-	2/2
Christoffer Skogh	Employee representative, member	6/6	-	–

by the Board. The Chairman is also responsible for providing the Nomination Committee with access to this evaluation.

The Board has seven Board members elected by shareholders' meetings and two employee representatives, one being a deputy.

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

The work of the Board in 2019

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 present 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.

After the AGM 2019, the members of the Audit Committee are Anna Belfrage and Charlotte Stjerngren. Prior to this, the members were Anna Belfrage 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 close and regular collaboration with the group's finance function on internal and external reporting of financial information.

There is also a well-developed collaboration on matters of internal control, selection and appraisal of auditing policies and models. In the financial year 2019, 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 comment 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 actions in the year.

Following up on the internal audit function's review in the year. The focus was 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. In 2019, the Remuneration Committee members were Johan Hagberg and Bahare Hederstierna. 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 programmes for performance-related pay for group management, subsidiary Presidents and other key individuals.
Monitor and evaluate application of the guidelines for remuneration to senior management that the AGM has resolved on and applicable remuneration models 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 models for group management.
Specifying the profitability-based, variable remuneration programme for group management, subsidiary Presidents and other key individuals, which ran during 2019.

After an evaluation, the Remuneration Committee concluded that:

NOTE is following the guidelines for remunerating senior management that the AGM 2019 approved.
Applicable remuneration models and levels are reasonable against the background of the company's operations.
Compensation from the profitabilitybased, variable remuneration programme that ran during 2019 for group management, subsidiary Presidents and other key individuals amounted to SEK 2.6 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 41. For information on remuneration and other benefits, see Note 8, Employees, personnel expenses and remuneration to senior management, on page 54.

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 2019 re-elected Öhrlings PricewaterhouseCoopers AB as audit firm, with Niklas Renström as Auditor in Charge until the AGM 2020.

The group's operational governance

Chief Executive Officer NOTE's CEO leads operating activities. 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' operations Subsidiaries' operations are followed up monthly on the basis of a number of operational targets, financial targets and key indicators.

Internal controls and risk management

Control environment

The segregation of roles and duties 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 mainly managed 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.

These risks are evaluated from a matrix of probability and degree of financial impact. 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 regularly.

For more information on risks and risk management, see Operations on page 13 and Note 24, Financial risks and finance policy on page 61-62.

Monitoring control activities

The monitoring of NOTE's units is in continuous development. 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 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 the shareholders in NOTE AB (publ) Corporate identity number 556408-8770

Engagement and responsibility

It is the board of directors who is responsible for the corporate governance statement for the year 2019 on pages 28–33 and that it has been prepared in accordance with the Annual Accounts Act.

The scope of the audit

Our examination has been 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.

Opinions

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

Niklas Renström Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 20 March 2020

Group management

	JOHANNES LIND-WIDESTAM	DAVID KRANTZ	HENRIK NYGREN	FREDRIK SCHULTZ
Position	Chief Executive Officer	Chief Procurement Officer	Chief Financial Officer	Chief Sales Officer
Employed	2018	2017	2006	2015
Born	1972	1980	1956	1972
Education	M.Sc. (Econ.)	M.Sc. (Eng.) in communications and transport systems.	M.Sc. (Eng.) in industrial engineering and management.	Graduate of the Swedish Air Force Officer Training School, political economics qualifications.
Other significant assignments	None.	None.	None.	Board member of Ivisys AB.
Professional experience	Experience of a range of executive positions, including serving as CEO of Kitron Sverige AB and Elos Medtech AB.	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.	Many years' experience of the EMS sector from senior positions in supply chain, procurement and sales in multinational groups such as Flex and Enics.
NOTE shareholdings*	71,000 shares.	0 shares.	100,000 shares.	50,000 shares.
NOTE option holdings	565,000 options.	100,000 options.	165,000 options.	165,000 options.

* As per 28 February 2020, including contingent holdings by closely affiliated natural and legal persons and is reported in accordance with the Market Abuse Regulation.

Board of Directors

JOHAN HAGBERG ANNA BELFRAGE KJELL-ÅKE ANDERSSON

	JOHAN HAGBERG	KJELL-ÅKE ANDERSSON	ANNA BELFRAGE	KAJ FALKENLUND
Position	Chairman	Board member	Board member	Board member
Elected	2017	2010	2019	2019
Born	1971	1946	1962	1958
Education	Political economist and mathematician.	M.Sc. (Eng.)	M.Sc. (Econ.)	Undergraduate qualifications in mathematics, physics and mechanical engineering.
Main occupation	Professional investor.	Directorships and consulting in corporate management.	Directorships and financial consultant.	COO/Deputy CEO of SkulFlex Holding AB.
Other directorships	None.	Chairman of the Board of Cervitrol AB and Domitech AB. Director of Mekatronik Konsult i Lund AB.	Board member of Ellevio AB, Isofol AB, Mycronic AB and Serneke AB.	Board member of SVETAK.
Professional experience	Former mathematics teacher, entrepreneur active in the entertainment industry, as well as cultural producer active within regional adult education provider ABF Stockholm.	Over 45 years' experience in industry, about 35 years in the EMS sector. Various positions including development engineer, production manager and CEO of companies including Electrolux and NOTE.	Broad-based experience of accounting and manufacturing. Previous positions include serving as CFO of ABS Group, Beijer Electronics Group and Södra Skogsägarna.	Eleven years as CEO of Skultuna Flexible AB. Long-term experience as Global VP of Supply Management, most recently with ABB.
NOTE shareholdings*	7,080,611 shares.	760,000 shares	0 shares.	1,675 shares.

Non-affiliated to company and management	Yes.	Yes.	Yes.	Yes.
Non-affiliated to major shareholders	No.	Yes.	Yes.	Yes.

* As per 28 February 2020, including contingent holdings by closely affiliated natural and legal persons and is reported in accordance with the Market Abuse Regulation.

Formal Annual Accounts

Report of the Directors	39
Five-year summary	43
Consolidated Financial Statements	46
Notes on the Consolidated Financial Statements	50
Parent Company's Financial Statements	64
Notes on the Parent Company's Financial Statements	68
Auditor's report	73

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 parent company NOTE AB (publ) and wholly owned subsidiaries in Sweden, Finland, the UK, Estonia and China.

OPERATIONS IN 2019

2019 was a record year for NOTE. NOTE has stated a growth target to increase market shares, and achieve minimum stable organic yearly growth of 10%. In 2019, sales increased by 28% to SEK 1,760 million, the group's highest-ever sales level. NOTE achieved growth on all domestic markets, and at all plants.

NOTE's order books continued to expand and at year-end, were about 25% larger than one year previously. NOTE has great confidence in the future and is now maintaining the pace required to be one of the fastest growing companies in the industry.

NOTE's business model builds on long-term customer relations and partnerships. One important success factor is to continuously improve the quality and delivery precision of services, where NOTE is now setting a sector-leading standard. NOTE has a strong customer base, and partners with several of the Nordic leaders across a broad spectrum of sectors, from traditional industries to new, high-growth application segments. The potential to expand business with existing customers remains high. Consistent with its growth plan, NOTE has successfully expanded its partnerships with several major customers, making a significant contribution to growth in the year.

NOTE is seeing great interest in its flexible and broad-based customer offering. Focusing on those market and technology segments where NOTE is already strong, it was entrusted by a large base of new business customers in the year. New customer partnerships with high future potential include DeLaval, Maven Wireless and several new, exciting customers in communication and medtech. NOTE is now about to start batch production and higher volumes on more new business than ever, which feels reassuring for the future.

NOTE's positive earnings trend continued. Adjusted for non-recurring costs related to the change of CEO in 2018, operating profit was up by 37% to SEK 124 million. Calculated on the same basis, NOTE's operating margin expanded by 0.5 percentage points to 7.1%, both of which are its highest-ever levels. Return on operating capital was over 20%, and thus above the externally communicated profitability target. The earnings increase has several causes, including higher sales, stable margins on customer assignments, restructuring programmes completed and the strong progress of NOTE's Western European operations, especially in Sweden and Finland.

The efficient management of working capital is an important success factor in NOTE's sector. In the first half-year, NOTE faced major challenges with high capital tied-up in inventory. Primarily, this was an effect of growth, a large number of major projects in start-up and difficult conditions on the global market for electronic components. Through resolute action, NOTE succeeded in significantly reducing inventory in the second-half-year, and working capital is now in better balance. As a consequence, in the fourth quarter, the group achieved very strong cash flow after investments of SEK 96 million, or SEK 3.32 per share. For the full year, cash flow was SEK 75 million.

NOTE also prepared for continued growth in the year, in terms of skills, and through performance-enhancing investments in equipment. In terms of finances and capacity, NOTE is well prepared to keep growing. Liquidity is very satisfactory and our equity to assets ratio is just over 41%.

SALES AND RESULTS OF OPERATIONS 2019 Group

Sales

NOTE is one of the most competitive electronics manufacturers in the Nordics, and a stable business partner for Swedish and international companies that need advanced EMS solutions.

NOTE sells to a large customer base, essentially active in industry, communication, medtech, defence and high-end consumer electronics. Its customer base includes larger corporations active on the world market, as well as local enterprises whose primary sales are in northern Europe. Usually, customers outsource all electronics manufacture to one or several EMS partners. Another clear trend is for customers increasingly demanding manufacture and direct shipment of box build products.

The demand for NOTE's services progressed positively in the year. Sales rose by 28% to SEK 1,760 (1,379) million. Adjusted for the sales of Speedboard Assembly Services of the UK, which was acquired in the fourth quarter of 2018, growth was 17%. The positive impact of exchange rate movements, mainly USD and EUR, was about 3%.

The sales gains consisted of expanded partnerships on existing accounts, as well as the progressive impact of increased sales on new business accounts. Sales increased on all domestic markets, and from all plants. In Western Europe, sales growth (excluding acquisitions) of 17% was achieved. Sales performance was especially brisk in Sweden and Finland,

particularly to industrial and medtech industry customers. The sales from our plant in Estonia—mainly to customers in northern Europe—performed positively. Growth was 23%, mainly due to one customer partnership in the communica tion segment and intensified collabora tions with industrial customers. Sales from our plant in China, which are to local and global customers, grew by 13%.

NOTE endeavours to secure long-term customer relationships and partnerships. Deeper partnerships on new product generations were intensified with several members of NOTE's strong customer base.

In recent years, NOTE has secured many new accounts, both large global corporations and SMEs across Europe and Asia. 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 45% (53%) of group sales. No single customer (group) repre sented more than about 6% (10%) of total sales.

The group's order book, which is a combination of fixed orders and custo mer forecasts, progressed positively. At year-end, our order book was about 25% above the previous year's level.

Results of operations

In order to make us more competitive and create the potential for profitable growth, NOTE has been conducting methodical improvement work at all the group's units. This work is conducted locally at each plant and through a number of groupwide projects. Over and above initiatives to expand and develop its customer of fering, NOTE's focus is on measures that improve delivery precision and quality performance, and on cost and working capital rationalisation.

Mainly as a consequence of increased sales with stable margins to current and new business customers, gross profit in creased by 20% to SEK 206 (172) million. Gross margins narrowed somewhat to 11.7% (12.5%), mainly due to an altered composition of customer assignments. This included large-scale batch deliveries with a relatively high share of materials for the communication industry commencing after the summer, while sales in China in 2018 had a higher service share, with no cost of materials.

Sales and administration overheads were SEK 82 (83) million for the period. Adjusted for non-recurring costs linked to the change of CEO in 2018, overheads were up by 8%, and essentially due to extra costs for Speedboard, which was acquired in the fourth quarter 2018. As a share of sales and adjusted for nonrecurring costs in 2018, overheads were 4.7% (5.6%).

Other operating income/expenses, mainly consisting of the revaluation of as sets and liabilities denominated in foreign currency, were SEK 0 (-5) million.

Operating profit increased by 48% to SEK 124 (84) million. Underlying ope rating profit adjusted for non-recurring costs of SEK 7 million in 2018, was up by 37% to SEK 124 (91) million. Calculated on the same basis, the operating margin widened by 0.5 percentage points to 7.1% (6.6%).

Mainly as a result of an increased net debt in the beginning of the year, net financial income/expense reduced to SEK -8 (-5) million.

Profit after financial items increased by 47% to SEK 116 (79) million, equivalent to a profit margin of 6.6% (5.7%).

Profit after tax was up by 44% to SEK 92 (64) million, or SEK 3.20 (2.22) per share. The tax expense for the year was 20% (19%) 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 period was SEK 38 (37) million, and mainly related to intra-group services. Net financial items increased to SEK 76 (41) million, primarily through increased Group contributions.

The Parent Company's profit after tax amounted to SEK 44 (17) million.

FINANCIAL POSITION, CASH FLOW AND CAPITAL EXPENDITURE Cash flow

Competing successfully in the high mix market segment sets demanding standards on flexibility in manufacture, the effective supply of materials and the capability to deliver custom manufactur ing and logistics solutions. Accordingly, NOTE puts a sharp focus on continuously improving its business methods and internal processes in these segments.

In recent years, the global market for electronic components has been under strain, with implications including exten ded lead-times and limited availability of certain types of component. The com bination of this problematic position on the component market, high sales growth and the start-up of many new manufac turing projects, contributed to capital tied up in inventory above desired levels in the spring. Some stabilisation of the component market, coupled with focused actions at all plants, helped reduce inven tory significantly in the second half-year. So despite manufacturing and sales volume being over 20% higher, capital tied-up in inventory was at the same level as the previous year-end.

NOTE works continuously on monito ring credit risk and limiting the number of outstanding days of credit. Accounts receivable—trade, which had a natural increase in the year, were 17% higher at year-end than at the previous year-end. In view of the sales growth, the number of outstanding customer credit days was thus slightly lower than at the previous year-end.

Accounts payable—trade mainly consist of sourcing electronic components and other production materials. NOTE works actively on continuing to develop its partner model on the supplier side, which involves sourcing being concentrated on fewer, quality-assured providers. This also results in more efficient utilisation of working capital. Mainly as a result of the reduction

in inventories during the last half-year, accounts payable—trade were somewhat lower than at the previous year-end.

Continued positive earnings performance combined with rationalisation of working capital in the second half-year, mainly inventory, contributed to significant cash flow improvement. Cash flow for the full year was SEK 75 (-76) million, or SEK 2.60 (-2.63) per share.

Equity to assets ratio

According to NOTE's externally communicated financial targets, the minimum equity to assets ratio should be 30%. At year-end, the equity to assets ratio increased to 41.2% (39.8%). The equity to assets ratio was negatively impacted by some two percentage points due to IFRS 16, which was adopted in the year. The ratio was negatively impacted by just under two percentage points more by the share dividend paid in the spring. The proposed dividend to shareholders of SEK 1.20 per share, or SEK 33 million, would reduce the equity to assets ratio by about three percentage points.

Liquidity and net debt

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

The group's available cash and cash equivalents, including un-utilised overdraft facilities, were SEK 189 (128) million at year-end. Factored accounts receivable—trade were approximately SEK 224 (195) million. Excluding financial liabilities resulting from the adoption of IFRS 16 in 2019, net debt was approximately SEK 138 (157) million at year-end.

Investments

Capital expenditure on fixed assets was SEK 40 (29) million in the year, corresponding to 2.3% (2.1%) of sales. These investments mainly consisted of projects to increase efficiency and quality.

Plan depreciation and amortisation excluding amortisation of right-of-use assets (IFRS 16), increased to SEK 28 (19) 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 and implementing a 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. A repurchase programme of treasury shares was executed in December 2018, with 1 million shares acquired at an average price of SEK 21.85 per share. The Board of Directors intends to propose that the AGM in April 2020 cancels these shares. This would reduce the number of outstanding shares by just over 3%.

At 31 December 2019, there were 1,111,000 outstanding share warrants in the incentive programmes approved by the AGMs in 2017 and 2018, and the EGM in 2019.

There are no limitations on transferring shares in the form of pre-emption clauses or similar that the company is aware of. As of the reporting date there was one shareholder with a shareholding of more than 10%, Johan Hagberg with 20.3% (20.2%) 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 26–27.

GUIDELINES FOR REMUNERA-TING SENIOR MANAGERS

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

Remuneration to the Board of Directors is based on fees approved by the AGM, by which basic compensation for all Board members excluding the Chairman is SEK 140,000. A SEK 65,000 additional fee is payable to the Chairman of the Audit Committee, SEK 35,000 to the other member of the Audit Committee, SEK 20,000 to the Chairman of the Remuneration Committee, and SEK 10,000 to the other member of the Remuneration Committee. The Chairman of the Board receives a basic fee of SEK 255,000.

Remuneration to NOTE's management was decided in accordance with the Board of Director's guidelines, which were adopted by the AGM 2019.

Basic salary will consider individual responsibilities, experience and performance and will be subject to annual review. Variable remuneration is dependent on individual satisfaction of quantitative and qualitative targets. In 2019, variable remuneration was based on targets for the group's sales, earnings and cash flow. The maximum variable remuneration is subject to a maximum of 100% of basic salary.

Pensionable age is 65. NOTE offers benefits similar to the ITP scheme (supplementary pensions for salaried employees). The dismissal pay and severance pay of 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 54.

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.

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 1,070 (980) in the year, 610 (523) of them being women

Work attendance in the group was 95.8% (93.8%) of regular working hours and staff turnover was 20.7% (16.9%).

For more information on employees, see the Sustainability Report on pages 20–23.

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 14–23.

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 aftersales.

NOTE's business model, which is designed to increase sales growth combined with limited overheads and investment costs in high-cost countries, helps reduce risks in 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 61-62.

POST-BALANCE SHEET EVENTS

The group has no significant events after the end of the financial year to report, apart from the consequences of the spread of the coronavirus being hard to predict.

EXPECTATIONS OF FUTURE PRO-GRESS

Based on NOTE's good order books, backed by a large number of new deals in ramp-up, NOTE has good potential to sustain its strong growth, and keep improving profitability. However, despite favourable future prospects of its underlying business, it is difficult to predict the consequences the spread of the coronavirus will have on NOTE, its customers and suppliers.

PROPOSED APPROPRIATION OF PROFITS

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

Brought forward	33,432,333
Profit for the year	43,841,555
Total	77,273,888
Distributed to shareholders *	33,447,120

Carried forward	43,826,768
Total	77,273,888

* Excluding the 1 million shares held by the company itself.

BOARD OF DIRECTORS' REASONED STATEMENT ON THE PROPOSED DIVIDEND

Against the background of NOTE's profit performance, the Board of Directors is proposing a dividend payment to shareholders of SEK 1.20 (0.70) per share, corresponding to SEK 33 (20) million. The proposed dividend to shareholders amounts to approximately 45% of the company's profit as of the reporting date and reduces the group's equity to assets ratio from 41.2% to approximately 38% calculated on year-end figures.

The Board of Directors considers that the proposed dividend is consistent with the Swedish Companies Act's prudence rule, and accordingly is justifiable on the basis of provisions relating to the company's equity, investment requirement, liquidity and financial position, as well as 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 is the period 1 January to 31 December inclusive. All amounts are in SEK 000 unless otherwise indicated.

Five-year summary

SEK m (unless otherwise stated)

Consolidated Income Statement	2019	2018	2017	2016	2015
Net revenue	1,760.4	1,378.6	1,175.7	1,098.1	1,121.5
Gross profit	206.5	171.7	140.3	131.7	122.5
Operating profit	124.4	83.9	93.4	60.2	45.2
Profit before tax	116.0	78.8	88.8	54.5	39.8
Profit for the year	92.3	64.2	72.1	45.2	34.6
Consolidated Balance sheet
ASSETS
Non-current assets	288.0	217.5	146.3	152.3	156.7
Current assets	841.1	747.5	609.6	542.2	506.5
TOTAL ASSETS	1,129.1	965.0	755.9	694.5	663.2
EQUITY AND LIABILITIES
Equity	465.2	383.6	369.2	318.0	287.1
Non-current liabilities	70.6	29.1	14.0	9.3	12.1
Current liabilities	593.2	552.3	372.7	367.2	364.0
TOTAL EQUITY AND LIABILITIES	1,129.1	965.0	755.9	694.5	663.2
Consolidated Cash Flow Statement
Cash flow from operating activities	96.5	26.8	39.7	48.6	18.7
Cash flow from investing activities	–21.5	–102.8	30.0	–7.7	–13.5
CASH FLOW AFTER INVESTING ACTIVITIES	75.0	–76.0	69.7	40.9	5.2
Cash and cash equivalents at beginning of period	31.0	87.2	71.6	47.3	35.2
Cash flow before financing activities	75.0	–76.0	69.7	40.9	5.2
Cash flow from financing activities	–33.5	18.0	–53.8	–17.0	7.3
Exchange rate difference in cash and cash equivalents	0.1	1.8	–0.3	0.4	–0.4
CASH AND CASH EQUIVALENTS AT END OF YEAR	72.6	31.0	87.2	71.6	47.3
Consolidated key figures
Earnings per share (basic), SEK	3.20	2.22	2.50	1.57	1.20
Earnings per share (diluted), SEK	3.18	2.22	2.49	1.57	1.20
Cash flow per share after investing activities, SEK	2.60	–2.63	2.41	1.42	0.18
Market capitalisation at end of period	1,139	616	702	491	344
Operating margin, %	7.1	6.1	7.9	5.5	4.0
Profit margin, %	6.6	5.7	7.6	5.0	3.5
Return on operating capital, %	20.7	17.8	24.2	16.1	12.9
Return on equity, %	21.7	17.1	21.0	14.9	12.4
Operating capital (average)	599.5	471.1	385.2	373.7	351.7
Interest-bearing net debt	193.1	157.7	22.9	60.4	81.9
Equity to assets ratio, %	41.2	39.8	48.8	45.8	43.3
Net debt/equity ratio, multiple	0.4	0.4	0.1	0.2	0.3
Interest coverage ratio, multiple	8.1	6.4	18.3	8.6	5.3
Capital turnover rate (operating capital), multiple	2.9	2.9	3.1	2.9	3.2
Sales per employee, SEK 000	1,645	1,407	1,289	1,113	1,193

Operating margin 2019

Equity to assets ratio 2019

Sales growth 2019 27.7%

For Financial definitions, see Note 31 on page 63.

Financial accounts

Consolidated Income Statement

SEK 000	NOTE	2019	2018
Net revenue	2, 3	1,760,442	1,378,577
Cost of goods sold and services		–1,553,987	–1,206,883
Gross profit		206,455	171,694
Selling expenses		–49,532	–51,198
Administrative expenses		–33,000	–32,166
Other operating revenue	4	24,390	21,039
Other operating expenses	5	–23,955	–25,484
Operating profit	3, 6, 7, 8, 27	124,358	83,885
Financial income		7,890	9,529
Financial expenses		–16,257	–14,657
Net financial income/expense	9	–8,367	–5,128
Profit before tax		115,991	78,757
Tax	10	–23,719	–14,517
Profit for the year, attributable to Owners of the Parent Company		92,272	64,240
Earnings per share (basic), SEK	17	3.20	2.22
Earnings per share (diluted), SEK	17	3.18	2.22

Consolidated Statement of Other Comprehensive Income

SEK 000	2019	2018
Profit for the year	92,272	64,240
Other comprehensive income
Items that can be subsequently reversed in the Income Statement:
Exchange rate differences	11,036	5,190
Cash flow hedges	23	120
Tax on cash flow hedges and exchange rate difference	–1,558	–137
Total other comprehensive income, net after tax	9,501	5,173
Total comprehensive income for the year, attributable to Owners of the Parent Company	101,773	69,413

Consolidated Balance Sheet

SEK 000	NOTE	31 Dec 2019	31 Dec 2018
Assets
Goodwill	11	109,860	106,690
Customer relations	11	13,138	15,390
Other intangible assets	11	13,588	12,898
Right-of-use assets	12	53,922	–
Property, plant and equipment	3, 13	95,646	79,900
Long-term receivables	14	674	743
Deferred tax assets	10	1,132	1,896
Total non-current assets		287,960	217,517
Inventories	3, 15	370,057	369,986
Accounts receivable–trade	3, 23, 24	380,221	327,216
Tax receivables		1,715	1,181
Other receivables	14	7,103	6,586
Prepaid expenses and accrued income	16	9,413	11,433
Cash and cash equivalents	23, 26	72,619	30,987
Total current assets		841,128	747,389
TOTAL ASSETS		1,129,088	964,906
Equity	18
Share capital		14,436	14,436
Other paid-up capital		218,087	218,729
Reserves		17,724	8,223
Retained profit incl. profit for the year		215,002	142,241
Total equity		465,249	383,629
Liabilities
Long-term interest-bearing liabilities	19, 23, 24	20,800	12,462
Non-current lease liabilities for right-of-use assets	19, 23, 24	38,114	–
Deferred tax liabilities	10	11,704	7,724
Other non-current provisions and other financial liabilities	20, 23, 24	–	8,947
Total non-current liabilities		70,618	29,133
Current interest-bearing liabilities	19, 23, 24	190,695	176,023
Current lease liabilities for right-of-use assets	19, 23, 24	16,093	–
Accounts payable–trade	23, 24	269,654	273,599
Tax liabilities		10,355	8,910
Other liabilities	21	28,074	19,920
Accrued expenses and deferred income	22	71,620	73,113
Other provisions and other financial liabilities	20, 23, 24	6,730	579
Total current liabilities		593,221	552,144
TOTAL EQUITY AND LIABILITIES		1,129,088	964,906

For information on the group's pledged assets and contingent liabilities see Note 25 on page 62.

Consolidated Statement of Changes in Equity

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit incl. profit for the year	Total equity attribu- table to Owners of the Parent Company
Opening equity, 1 Jan 2018	14,436	218,330	3,050	133,405	369,221
Effect of amended accounting principle				–4,680	–4,680
Amended opening equity, 1 Jan 2018	14,436	218,330	3,050	128,725	364,541
Comprehensive income
Profit for the year				64,240	64,240
Other comprehensive income
Exchange rate differences			5,190		5,190
Cash flow hedges			120		120
Tax on cash flow hedges and exchange rate difference			–137		–137
Total comprehensive income			5,173	64,240	69,413
Payment warrants		399			399
Repurchase treasury shares				–21,851	–21,851
Dividend				–28,873	–28,873
Closing equity, 31 Dec 2018	14,436	218,729	8,223	142,241	383,629

SEK 000	Share capital	Other paid-up capital	Reserves	Retained profit incl. profit for the year	Total equity attribu- table to Owners of the Parent Company
Opening equity, 1 Jan 2019	14,436	218,729	8,223	142,241	383,629
Comprehensive income
Profit for the year				92,272	92,272
Other comprehensive income
Exchange rate differences			11,036		11,036
Cash flow hedges			23		23
Tax on cash flow hedges and exchange rate difference			–1,558		–1,558
Total comprehensive income			9,501	92,272	101,773
Payment warrants		–642			–642
Dividend				–19,511	–19,511
Closing equity, 31 Dec 2019	14,436	218,087	17,724	215,002	465,249

Consolidated Cash Flow Statement

SEK 000	NOTE	2019	2018
	26
Operating activities
Profit before tax		115,991	78,757
Reversed depreciation and amortisation		44,237	19,248
Other non-cash items		831	–3,153
Tax paid		-19,966	–10,698
		141,093	84,154
Change in working capital
Increase (–)/decrease (+) in inventories		5,166	–77,931
Increase (–)/decrease (+) in trade receivables		–44,379	–27,810
Increase (+)/decrease (–) in trade liabilities		–5,392	48,358
		–44,605	–57,383
Cash flow from operating activities		96,488	26,771
Investing activities
Purchase of property, plant and equipment		–18,370	–18,082
Purchase of intangible assets		–3,097	–5,020
Acquisition of subsidiary	29	–	–79,747
Cash flow from investing activities		–21,467	–102,849
Financing activities
Borrowings	26	8,937	74,498
Amortisation of leasing debts	26	–22,258	–6,137
Repurchase of treasury shares		–	–21,851
Payment warrants		–642	399
Dividends paid		–19,511	–28,873
Cash flow from financing activities		–33,474	18,036
Cash flow for the year		41,547	–58,042
Cash and cash equivalents
At beginning of period		30,987	87,189
Cash flow before financing activities		75,021	–76,078
Cash flow from financing activities		–33,474	18,036
Exchange rate difference in cash and cash equivalents		85	1,839
Cash and cash equivalents at end of period		72,619	30,987

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, Critical estimates and judgements on page 63.

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 20 March 2020. The Consolidated Income Statement and Balance Sheet will be subject to adoption at the AGM (Annual General Meeting) on 23 April 2020. 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

The new standard IFRS 16 Leases is applied in the financial statements for the year beginning 1 January 2019. The IASB published a new standard on leases in January 2016, IFRS 16 Leases, which replaces IAS 17 Leases and the associated SIC and IFRIC interpretations. 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. The standard is applied for the financial year beginning 1 January 2019.

NOTE conducted a review of introduction of IFRS 16 Leases in 2018 and the effects this standard would have on the Consolidated financial statements. For machinery and equipment, the new standard means no change, because these items were already recognised as property, plant and equipment. The biggest impact is on the group's lease contracts for property, now being accounted as right-of-use assets.

NOTE has adopted the modified retrospective approach on adopting IFRS 16, which involved no restatement of the consolidated financial statements for 2018. Instead, the opening balances for 2019 have been restated. For computing interest on lease liabilities, an average incremental borrowing rate of 2.7% has been applied. The right-of-use assets as of 31 December 2018 were approx. SEK 66 million. The opening balances for 2019 have been restated pursuant to IFRS 16 leases, implying that non-current assets (right-of-use assets) have been increased, while financial liabilities were increased by the corresponding amount. The additional items are recognised on separate items under the group's noncurrent assets and the group's liabilities. The group has decided to continue to account machinery and other technical plant financed with leases under the property, plant and equipment item. For more information, see note 12, Right-of-use assets on page 57 and note 13 Property, plant and equipment on page 58.

New standards and interpretations

A number of new standards and interpretations come into effect for financial years beginning after 1 January 2019, and were not applied in the preparation of these financial statements. None of them are expected to have any material impact on the consolidated financial statements.

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.

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

When NOTE has a binding agreement with a customer, performance obligations and transaction price pursuant to this agreement are identified. An agreement that is binding is normally reached when a customer places an order that is confirmed by NOTE. Orders are often based on some form of master agreement, but these are non-binding in terms of quantities. Transaction prices are measured as the fair value of what will be received, and correspond to the amount received for sold goods after deducting for discounts, returns and VAT.

Sale of goods

NOTE's revenues are mainly sourced from the production of goods in the form of PCBAs, subassemblies or box build products. Products are manufactured according to customer specification, but NOTE participates in tailoring the manufacturing process. NOTE's performance obligation is to produce and deliver in accordance with the customer's order. Revenue from the sale of goods is recognised in profit or loss when the performance obligation is considered satisfied, which is when control over the goods transfers to the customer in accordance with the terms & conditions of delivery. Usually, a performance obligation is fulfilled at a single point in time. 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.

Sales of services

Revenue for the sale of services occurs in the form of consulting services relating to prototyping, etc. Revenue from the sale of services is recognised over time providing that NOTE is entitled to compensation if a project is cancelled in advance. If there is no such right, revenue is recognised when the project has been completed, and the right to compensation is invoked.

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.

Leases

Accounting policies after 1 January 2019

The group recognises rights of use and lease liabilities relating to all lease arrangements in its Balance Sheet, with certain exceptions. This model reflects the lessee's rights to use an asset for a specific period of time at the start of the lease, and its liability to pay for this right. In evaluating a lease arrangement, lease components are separated from those components not containing a lease, and the lease period is defined considering any applicable extension or cancellation options.

The lease liability is initially measured as the present value of lease payments that are not paid at the start state, normally discounted based on the group's incremental borrowing rate for leases. Lease payments included in the liability are fixed payments, variable payments affected by indexation or other adjustment factor, residual values and penalties for breach of contract.

Rights of use are initially measured at cost, which initially, is the same amount as defined on initial measurement of the lease liability, restated for any lease payments before and at the start state, less any discounts received, plus any initial direct expenses or restoration costs.

The group applies the practical expedient entitling it not to recognise short-term lease arrangements, and leases with low underlying asset values. For these arrangements, expenses are recognised on a straight-line basis. The interest cost for least liabilities is presented as a component of financial expenses separately from amortisation of rights of use. In the Cash Flow Statement, payments attributable to the lease liability are recognised in financing activities, while payments for short-term leases, leases of low value assets and variable lease payments not included in measurement of the lease liability are recognised in operating activities.

Accounting policies prior to 1 January 2019

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.

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.

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 and lease liabilities, 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

Classification

The group classifies its financial assets and liabilities in the following categories: financial assets and liabilities measured at fair value, and assets and liabilities measured at amortised cost. The classification of investments in debt instruments depends on the group's business model for accounting financial assets and the contracted terms for the cash flows of these assets.

Financial assets and liabilities measured at fair value

For the group, any derivatives not included in hedge accounting, and the contingent portion of the purchase consideration of acquisitions is included in this category.

Assets measured at amortised cost

The group's assets in this class consist of trade receivables, cash and cash equivalents and the financial instruments recognised under other receivables.

Trade receivables and other financial receivables are initially recognised at transaction price. However, trade receivables with a significant financing component are recognised at fair value. The group holds trade receivables in order to collect contracted cash flows and accordingly, at subsequent reporting dates, measures them at amortised cost by applying the effective interest method less any credit allowances. Trade receivables and other receivables are included in current assets apart from items with due dates more than 12 months from the reporting period, which are classified as non-current assets.

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

Liabilities recognised at amortised cost

The group's liabilities in this class consist of non-current and current interest-bearing liabilities, accounts payable—trade and those financial instruments recognised in other liabilities.

Interest-bearing liabilities, accounts payable—trade and other financial liabilities are initially recognised at fair value including transaction costs, and subsequently at amortised cost by applying the effective interest method.

NOTE uses debt factoring as part of its external finance. The whole factored trade receivable is recognised as a pledged asset in consolidated contingent liabilities. The factoring liability is recognised as a current interest-bearing liability on 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% 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.

Recognition and measurement

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.

Impairment of financial assets

Assets recognised at amortised cost

The group judges the future expected credit losses associated with assets measured at amortised cost. The group recognises a credit loss allowance for such expected credit losses at each reporting date. For trade receivables, the group applies the simplified approach to credit allowances, i.e. the allowance corresponds to the expected loss throughout the term of trade receivables. To measure expected credit losses, trade receivables have been grouped based on allocated credit risk characteristics and expected overdue days. The group uses forward-looking variables for expected credit losses. Expected credit losses are recognised in the Consolidated Income Statement under the cost of goods sold item.

Hedge accounting

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.

Property, plant and equipment

Property, plant and equipment are recognised in the group at cost less deductions for accumulated depreciation and potential impairment losses. The cost includes the purchase price and expenses directly attributable to bringing the asset into the location and condition for use in accordance with the purpose of its acquisition. The accounting principles for impairment losses are reported below.

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

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

Additional expenditure

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

Depreciation principles

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

Estimated useful lives:

Land improvements	20 years
Buildings, real estate used in business operations	see below
Leasehold improvements–permanent equipment, servicing facilities etc.
in buildings	5 years
Leasehold improvements–permanent installation, buildings	20 years
Permanent equipment, servicing facilities etc. in buildings	see below
Plant and machinery	5–10 years
Equipment, tools fixtures and fittings	3–5 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.

Customer relationships

Customer relationships have been identified on business combinations and are an intangible asset. Customer relationships are measured at fair value on acquisition, and then amortised on the straight-line basis over their expected useful life corresponding to the estimated time they will generate cash flows (see below).

Other intangible non-current assets

Other intangible non-current assets consist of capitalised expenditure for software, and trademarks etc. 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:

Goodwill		–
----------	--	---

Customer relationships, 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, deferred tax assets and financial assets, the carrying amounts of the group's assets are subject to impairment tests at each reporting date. If there are indicators of impairment, 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 value is the greater of fair value less selling expenses and value in use.

Reversal of impairment losses

Impairment of goodwill is 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.

Termination benefits

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 programme and other non-recurring expenses

A restructuring programme provision is recognised when the group has determined an executable and formal restructuring programme plan, and the restructuring programme 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 share warrants 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 Revenue from customer segment

All group sales are derived from EMS operations, i.e. contract manufacture services for electronics products. Essentially, revenue is recognised when control over the goods has transferred, which occurs on shipment from the warehouse. Generally speaking, NOTE has a diversified customer base where no single customer (group) represents more than 6 % (10%) of total group sales.

	Western Europe		Rest of World	Intra-group		Total
	2019	2018	2019	2018	2019	2018	2019	2018
EXTERNAL NET REVENUE
Industrial	670,251	544,525	418,310	346,646	–	–	1,088,561	891,171
Communication	114,170	86,708	195,915	174,175	–	–	310,085	260,883
Medtech	181,155	111,640	718	4,158	–	–	181,873	115,798
Defence	133,750	76,508	0	0	–	–	133,750	76,508
High end consumer	7,247	4,259	38,926	29,958	–	–	46,173	34,217
Total external net revenue	1,106,573	823,640	653,869	554,937	–	–	1,760,442	1,378,577

Regarding future sales, the group order backlog consists of a combination of fixed orders and customer forecasts/material authorizations. The order backlog amounts normally to approximately six months sales.

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. The segment also includes group eliminations.

	Western Europe		Rest of World Intra-group			Total
	2019	2018	2019	2018	2019	2018	2019	2018
NET REVENUE
External net revenue	1,106,573	823,640	653,869	554,937	–	–	1,760,442	1,378,577
Internal net revenue	4,462	10,637	65,129	80,338	–69,591	–90,975	–	–
Net revenue	1,111,035	834,277	718,998	635,275	-69,591	-90,975	1,760,442	1,378,577
OPERATING PROFIT
Operating profit	101,684	58,730	29,166	38,675	–6,492	–13,520	124,358	83,885
Operating profit	101,684	58,730	29,166	38,675	–6,492	–13,520	124,358	83,885
Financial income and expenses–net							–8,367	–5,128
Profit before tax							115,991	78,757

SIGNIFICANT ASSETS BY SEGMENT
Right-of-use assets	48,280	–	4,864	–	778	–	53,922	–
Property, plant and equipment	54,639	39,253	40,212	40,332	795	315	95,646	79,900
Inventories	237,525	217,641	132,532	152,345	–	–	370,057	369,986
External accounts receivable–trade	237,878	218,985	141,955	108,303	388	–72	380,221	327,216
Total assets	842,778	678,348	443,345	393,817	–157,035	–107,259	1,129,088	964,906
OTHER INFORMATION
Investments in property, plant and equipment	27,080	21,960	9,304	1,674	645	96	37,029	23,730
Depreciation and amortisation	–27,917	–7,396	–12,815	–10,019	–3,505	–1,833	–44,237	–19,248
Other non-cash items (excl. depreciation and amortisation)	1,042	–2,320	–684	–863	473	30	831	–3,153
Average number of employees	468	339	585	620	17	21	1,070	980

NOTE's registered office is in Sweden. Revenues from external customers in Sweden were SEK 722.6 (622.2) million, from the rest of Europe SEK 727.1 (496.8) million and from the rest of the world SEK 310.6 (259.6) million. Non-current assets in Sweden (excluding financial) were SEK 85.2 (72.5) million, in Estonia SEK 35.0 (31.1) million, the UK SEK 64.0 (60.1) million and in other countries SEK 48.0 (51.2) million as of the reporting date. Deferred tax assets in Sweden were SEK –1.9 (–1.8) million and other countries SEK 3.0 (3.7) million as of the reporting date.

	NOTE 4 Other operating revenue
--	--------------------------------

NOTE 5 Other operating expenses

	2019	2018
Exchange gains on trade receivables/liabilities	22,810	19,465
Other	1,580	1,574
Total	24,390	21,039

	2019	2018
Exchange losses on trade receivables/liabilities	–23,955	–25,216
Other	–	–268
Total	–23,955 –25,484

NOTE 6 Operating expenses by type

	2019	2018
Cost of goods and materials	–1,122,347	–859,174
Personnel expenses	–346,453	–294,733
Depreciation and amortisation	–44,237	–19,248
Other	–147,437	–142,576
Total	–1,660,474	–1,315,731

NOTE 7 Auditors' fees and reimbursement

	2019	2018
PwC
Auditing assignment	–1,029	–959
Other services	–	–92
Other Auditors
Auditing assignment	–619	–441
Tax consultancy	–12	–
Other services	–60	–595

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

NOTE 8 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits	2019	2018
Salaries and benefits	–267,167	–222,308
Pension expenses, defined-benefit plans	–	–
Pension expenses, defined-contribution plans	–16,688	–15,035
Social security contributions	–62,598	–57,390
Total	–346,453	–294,733

Average number of employees		2019 Of which men		2018 Of which men
Sweden	305	60%	261	70%
UK	123	19%	46	50%
Finland	54	54%	54	54%
Estonia	268	28%	278	27%
China	320	46%	341	43%
Group total	1,070	43%	980	47%

	2019	2018
Division between sexes in group management	Share of women	Share of women
Board members, Presidents	34%	34%
Other senior management, 3 (4) people	0%	0%

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 2019, 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 2.3 (2.6) million. The charges for next year are estimated at some SEK 2.5 million. The group's share of total expenditure to the plan is negligible. Alecta's surplus can be divided between policyholders and/or beneficiaries. At year-end 2019, Alecta's surplus, expressed as a collective consolidation ratio was 148% (142%). 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.

	2019	2018
Expenses for defined-contribution plans*	–16,688	–15,035

*Includes 2,305 (2,568) for an ITP plan insured with Alecta.

Senior management's remuneration			Basic salary,	Performance
		Directors' fees		related pay		Other benefits			Pension expenses		Total
Remuneration and other benefits		2019	2018	2019	2018	2019	2018	2019	2018	2019	2018
Chairman of the Board:	Johan Hagberg, since July 2018	–303	–184	–	–	–	–	–	–	–303	–184
	John Hedberg, left July 2018	–	–157	–	–	–	–	–	–	–	–157
Board members:	Kjell-Åke Andersson	–141	–161	–	–	–	–	–	–	–141	–161
	Anna Belfrage, since January 2019	–184	–	–	–	–	–	–	–	–184	–
	Bahare Hedenstierna	–137	–111	–	–	–	–	–	–	–137	–111
	Kaj Falkenlund, since January 2019	–131	–	–	–	–	–	–	–	–131	–
	Johannes Lind-Widestam, since April 2018, left January 2019	–	–75	–	–	–	–	–	–	–	–75
	Claes Mellgren, since January 2019	–131	–	–	–	–	–	–	–	–131	–
	Mikael Norin, left April 2018	–	–37	–	–	–	–	–	–	–	–37
	Per Ovrén, left January 2018	–	–6	–	–	–	–	–	–	–	–6
	Charlotte Stjerngren, since January 2019	–154	–	–	–	–	–	–	–	–154	–
CEO:	Johannes Lind-Widestam, since September 2018	–2,457	–481	–885	–187	–44	–	–769	–154	–4,155	–822
	Per Ovrén, left September 2018	–	–1,653	–	–562	–	–49	–	–486	–	–2,937
Other senior management (3 (4) people)		–3,809	–4,869	–656	–873	–260	–354	–1,121	–1,433	–5,846	–7,529
Total		–7,447	–7,734	–1,541	–1,809	–304	–403	–1,890	–2,073	–11,182 –12,019

Severance pay, CEO

In addition to remuneration in the above table to former CEO Per Ovrén for the period January–September 2018, a further SEK 7.0 million of termination costs were charged to operating profit for 2018. They primarily consist of salary, severance pay, pension, social security contributions and other benefits.

Other comments on the table:

Salary, benefits and Directors' fees are remuneration charged to consolidated profit for 2019. Directors' fees expensed in 2019 consist of fees for January-April approved by the AGM 2018, and fees for May-December approved by the AGM 2019. There was a profitability-based, performance-related remuneration programme for the CEO, senior managers, subsidiary Presidents and other key staff, during the financial year 2019. This programme had 18 (18) participants. In 2019, an estimated outcome of SEK 2.6 (2.7) million excluding social security contributions, was charged to the group's profit, of which SEK 1.5 (1.6)

million related to senior managers which was 47% of the possible maximum. The Report of the Directors states the details of the remuneration guidelines for senior managers.

Share warrant programme

An EGM in January also approved a three-year incentive programme based on 400,000 share warrants for the company's CEO, corresponding to some 1% of the number of outstanding shares of NOTE. The incentive programme was priced on market terms at a subscription price of SEK 29.20 per share. The fair value of the warrants was computed using the Black & Scholes option valuation model. The fair value was SEK 1.20 per share warrant. The ingoing parameters of the valuation model were as follows: share price of SEK 22.43, measured as an average for the period 21 January 2019 to 11 February 2019, interest of 0.0%, volatility of 28%, and dividends pursuant to NOTE's dividend policy at that time. Some repurchases of share warrants issued in the incentive programmes introduced in 2017-2018 were executed in the year.

NOTE 9 Net financial income/expense

	2019	2018
Interest income on bank balances	497	–
Exchange rate gains	7,393	9,529
Financial income	7,890	9,529

	2019	2018
Interest costs on financial liabilities measured at amortised cost	–4,032	–1,704
Interest costs of property, plant and equipment financed with leases	–623	–491
Interest costs of liabilities for right-of-use assets	–1,553	–
Bank charges	–3,219	–3,447
Exchange rate losses	–6,830	–9,015
Financial expenses	–16,257 –14,657
Net financial income/expense	–8,367	–5,128

NOTE 10 Tax

Reported in Income Statement	2019	2018
Current tax expense (–)/tax revenue (+)
Tax expense for the period	–21,015	–10,383
Adjustment of tax attributable to previous year	499	–1,709
Deferred tax expense (–)/tax revenue (+)

Deferred tax relating to temporary differences/ appropriations	–3,203	–2,425
Deferred tax revenue/expense in capitalised/utilised tax value in loss carry-forward	–	–
Adjustment of tax attributable to previous year	–	–
Total reported tax in group	–23,719	–14,517

Reconciliation of effective tax	%	2019	%	2018
Profit before tax		115,991		78,757
Tax at applicable rate for parent company	–21.4% –24,822			–22.0 –17,327
Effect of other tax rates for foreign subsidiaries	2.4%	2,836	3.1	2,414
Non-deductible expenses	–2.0%	–2,322	–0.3	–265
Non-taxable revenue	0.6%	716	2.5	2,005
Un-reported tax revenue on loss for the year	–0.4%	–488	–0.5	–382
Tax attributable to previous year	0.4%	499	–2.2	–1,709
Other	–0.1%	–138	0.8	747
Total reported tax in group	–20.4% –23,719			–18.4 –14,517

Deferred tax assets and loss carry-forwards

Deferred tax assets are temporary differences relating to the measurement of fixed assets and provisions, which will be allocated over most years.

Deferred tax assets are recognised in deductible loss carry-forwards to the extent it is likely that they can be used against future taxable profits. Deductible temporary differences and tax loss carry-forwards for which deferred tax assets have not been reported in the Income Statement and Balance Sheet amount to SEK 5.1 (4.7) million. None of the loss carry-forwards are subject to time limitation.

Provisions for deferred tax	31 Dec 2019	31 Dec 2018
Carrying amount at beginning of period	7,724	1,729
Amount provisioned in period	4,583	7,597
Amounts utilised in period	–603	–1,602
Carrying amount at the end of period	11,704	7,724

		Deferred tax asset	Deferred tax liability
Recognised in Balance Sheet	31 Dec 2019	31 Dec 2018	31 Dec 2019	31 Dec 2018	31 Dec 2019	31 Dec 2018
Intangible assets	–1,799	–1,840	2,496	2,924	–4,295	–4,764
Property, plant and equipment	135	–32	1,179	1,126	–1,044	–1,158
Derivatives measured at fair value	14	35	–	–	14	35
Provisions	2,782	3,733	1,248	1,172	1,534	2,561
Untaxed reserves	–	–	6,781	2,502	–6,781	–2,502
Tax receivables/liabilities	1,132	1,896	11,704	7,724	–10,572	–5,828

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

			2018					2019
			Reported					Reported
	Balance as of 1 Jan	Reported in Income Statement	against Comprehen sive Income	Reported directly in equity	Balance as of 31 Dec	Balance as of 1 Jan	Reported in Income Statement	against Comprehen– sive Income	Reported directly in equity	Balance as of 31 Dec
Intangible assets	–1,841	1	–	–2,924	–4,764	–4,764	638	–169	–	–4,295
Property, plant and equipment	–1,077	–81	–	–	–1,158	–1,158	47	68	–	–1,043
Derivatives measured at fair value	77	–17	–	–25	35	35	–14	–7	–	14
Loss carry-forward	–	–	–	–	–	–	–	–	–	–
Provisions	2,830	–417	–	148	2,561	2,561	–837	–190	–	1,534
Untaxed reserves	–690	–1,812	–	–	–2,502	–2,502	–4,347	67	–	–6,782
Other	–	–97	97	–	–	–	1,310	–1,310	–	–
Total	–701	–2,423	97	–2,801	–5,828	–5,828	–3,203	–1,541	–	–10,572

NOTE 11 Intangible assets

	Goodwill, purchased	Customer relations	Capitalised expenditure for software	Trademarks and brands etc	Total
Cumulative cost
Opening balance, 1 Jan 2018	72,263	–	15,785	1,977	90,025
Investments	37,399	16,386	5,020	102	58,907
Reclassification and exchange rate effects	–942	–465	–	–13	–1,420
Sales and retirements	–	–	–	–	–
Closing balance, 31 Dec 2018	108,720	15,921	20,805	2,066	147,512
Opening balance, 1 Jan 2019	108,720	15,921	20,805	2,066	147,512
Investments	–	–	3,097	–	3,097
Reclassification and exchange rate effects	3,170	1,216	–25	11	4,372
Sales and retirements	–	–	–	–	–
Closing balance, 31 Dec 2019	111,890	17,137	23,877	2,077	154,981
Accumulated amortisation and impairment
Opening balance, 1 Jan 2018	–2,030	–	–6,362	–1,842	–10,234
Reclassification and exchange rate effects	–	–	–	–22	–22
Amortisation for the year	–	–531	–1,664	–83	–2,278
Sales and retirements	–	–	–	–	–
Closing balance, 31 Dec 2018	–2,030	–531	–8,026	–1,947	–12,534
Opening balance, 1 Jan 2019	–2,030	–531	–8,026	–1,947	–12,534
Reclassification and exchange rate effects	–	–78	–	–8	–86
Amortisation for the year	–	–3,390	–2,329	–56	–5,775
Sales and retirements	–	–	–	–	–
Closing balance, 31 Dec 2019	–2,030	–3,999	–10,355	–2,011	–18,395
Carrying amounts
As of 1 Jan 2018	70,233	–	9,423	135	79,791
As of 31 Dec 2018	106,690	15,390	12,779	119	134,978
As of 1 Jan 2019	106,690	15,390	12,779	119	134,978
As of 31 Dec 2019	109,860	13,138	13,522	66	136,586

Impairment testing of goodwill

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 2019	31 Dec 2018
Western Europe	97,686	94,516
Rest of World	12,174	12,174
Total	109,860	106,690

Important variables	Method for defining values
Growth in the forecast period	Market growth has been estimated at 5 (5)% during the fore cast 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)%.
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 7.6% (8.1%) has been applied for both operating segments. The discount rate before tax amounts to 9.6% (9.7%). 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 7.6% to 8.6%, 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 12 Right-of-use assets

Right-of-use assets and assets financed with leases

The adoption of IFRS 16 has extended the definition of what should be classified as assets held through leases, and consequently, the group's leases on property have been treated as right-of-use assets effective 1 January 2019 onwards.

Accordingly, the opening balances as of 1 January 2019 have been restated as follows:

	1 Jan 2019
Right-of-use assets	65,382
Prepaid expenses	–474
Non-current lease liabilities attributable to right-of-use assets	50,278
Current lease liabilities attributable to right-of-use assets	14,630

Reported assets in the Balance Sheet relating to leases are SEK 65.4 million as of 1 January 2019. Obligations for operating leases pursuant to IAS 17 in the Annual Report for 2018 were SEK 67.8 million:

Operating leases	31 Dec 2019	31 Dec 2018
Leases with payment within one year	–	23,543
Leases with payment between one and five years	–	44,216
Total	–	67,759

The group's cost for other operating leases was SEK - (19,285).

The difference between obligations for future lease payments and the opening lease liability as of 1 January 2019 consists of the discount effect, exercise of extension options, shortterm arrangements and leases for assets of low value.

As of 31 December 2018, assets financed with leases were included in the Machinery and other plant item under Property, plant and equipment, in accordance with IAS 17 leases. The closing carrying amount of these items as of 31 December 2018 was SEK 28,861.

The group has decided to continue to recognise machinery and other plant financed with leases under the property, plant and equipment item, see note 13 Property, plant and equipment on page 58. On 31 December 2019, their value was SEK 39,063.

	Buildings and land(real estate used in business operations)	Total
Cumulative cost
Opening balance, 1 Jan 2019	65,382	65,382
Investments	4,450	4,450
Sales	–	–
Reclassification and exchange rate effects	–69	–69
Closing balance, 31 Dec 2019	69,763	69,763
Depreciation and impairment
Opening balance, 1 Jan 2019	–	–
Depreciation for the year	–15,866	–15,866
Sales	–	–
Reclassification and exchange rate effects	25	25
Closing balance, 31 Dec 2019	–15,841	–15,841
Redovisade värden
As of 1 Jan 2019	65,382	65,382
As of 31 Dec 2019	53,922	53,922

Lease liabilities attributable to right-of-use assets

	31 Dec 2019	1 Jan 2019
Non-current lease liabilities attributable to right-of-use assets	38,114	50,278
Current lease liabilities attributable to right-of-use assets	16,093	14,630

For more information on the maturity analysis of lease liabilities, see note 24 Financial risks and finance policy on page 61, and for more information on the cash flow effect related to liabilities attributable to right-of-use assets, see note 26 Cash Flow Statement on page 62.

The following amounts related to right-of-use assets are recognised in the Income Statement:

Amortisation and impairment are included in the following lines of the Income Statement

	2019	2018
Cost of goods sold and services	–14,698	–
Administrative expenses	–520	–
Selling expenses	–648	–
Total	–15,866	–

	2019	2018
Interest costs (included in financial costs)	–1,553	–
Expenditure related to short-term leases	–594	–
Expenditure related to leases were the underlying asset is of low value that are not short-term leases (included in cost of goods sold, administrative expenses and selling expenses).	–5,130	–

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 2018	23,266	10,243	179,345	34,900	247,754
Investments	626	2,277	19,431	23,199	45,532
Sales	–	–	–446	–934	–1,380
Reclassification and exchange rate effects	944	216	17,172	–14,480	3,852
Closing balance, 31 Dec 2018	24,836	12,736	215,501	42,685	295,758
Opening balance, 1 Jan 2019	24,836	12,736	215,501	42,685	295,758
Investments	356	2,171	31,448	3,054	37,029
Sales	–	–	–15,351	–155	–15,506
Reclassification and exchange rate effects	354	362	2,182	1,814	4,712
Closing balance, 31 Dec 2019	25,546	15,269	233,780	47,398	321,993
Depreciation and impairment
Opening balance, 1 Jan 2018	–10,624	–7,952	–130,528	–34,202	–183,306
Depreciation for the year	–366	–757	–14,771	–15,727	–31,621
Sales	–	–	311	934	1,245
Reclassification and exchange rate effects	–603	–167	–15,696	14,290	–2,176
Closing balance, 31 Dec 2018	–11,593	–8,876	–160,684	–34,705	–215,858
Opening balance, 1 Jan 2019	–11,593	–8,876	–160,684	–34,705	–215,858
Depreciation for the year	–481	–1,210	–18,025	–2,880	–22,596
Sales	–	–	15,335	126	15,461
Reclassification and exchange rate effects	–216	–344	–1,484	–1,310	–3,354
Closing balance, 31 Dec 2019	–12,290	–10,430	–164,858	–38,769	–226,347
Carrying amounts
As of 1 Jan 2018	12,642	2,291	48,817	698	64,448
As of 31 Dec 2018	13,243	3,860	54,817	7,980	79,900
As of 1 Jan 2019	13,243	3,860	54,817	7,980	79,900
As of 31 Dec 2019	13,256	4,839	68,922	8,629	95,646

Collateral

As of 31 December 2019, property with a carrying amount of 13,256 (13,244) was pledged as collateral for bank borrowings. As of 31 December 2019, there is ownership reservation on machinery, with a carrying amount of - (115).

Property, plant and equipment financed with leases

In addition to the right-of-use assets accounted in note 12 Right-of-use assets on page 57, leased production equipment is also included in the Machinery and other plant category in the table of Property, plant and equipment.

Leased production equipment via several different lease contracts

	2019	2018
Opening balance	57,549	49,037
Investments and exchange rate effects	19,576	8,512
Sales / obsolescence	42	–
Accumulated depreciation and exchange rate effects	–38,104	–28,688
Total	39,063	28,861

Liabilities attributable to property, plant and equipment financed with leases

	31 Dec 2019	31 Dec 2018
Non-current liabilities attributable to property, plant and equipment financed with leases	20,800	12,462
Current liabilities attributable to property, plant and equip ment financed with leases	9,627	5,726

For more information on the maturity analysis of liabilities attributable to property, plant and equipment financed with leases, see note 24 Financial risks and finance policy on page 61, and for more information on the cash flow effect associated with liabilities attributable to property, plant and equipment financed with leases, see note 26 Cash Flow Statement on page 62.

Depreciation and impairment is included in the following Income Statement lines

	2019	2018
Cost of goods sold and services	–22,250	–16,711
Administrative expenses	–247	–237
Selling expenses	–99	–22
Total	–22,596	–16,970

Of which depreciation and impairment of property, plant and equipment financed with leases amounts to, and is included in, the following lines of the Income Statement:

	2019	2018
Cost of goods sold and services	–9,090	–7,594
Total	–9,090	–7,594

The following amounts related to property, plant and equipment financed with leases are also recognised in the Income Statement:

	2019	2018
Interest costs (included in financial costs)	–623	–421

NOTE 14 Long-term receivables and other receivables

Long-term receivables	31 Dec 2019	31 Dec 2018
Interest-bearing loans	–	–
Other long-term receivables	674	743
Total	674	743
Other receivables that are current asset
Interest-bearing loans	–	–
VAT	3,986	3,749
Other	3,117	2,837
Total	7,103	6,586

NOTE 15 Inventories

	31 Dec 2019	31 Dec 2018
Raw materials and consumables	249,063	260,488
Products in process	65,017	47,855
Finished goods and goods for re-sale	76,639	79,850
Obsolescence provision	–20,662	–18,207
Total	370,057	369,986

The expensed inventories for the year are stated in Note 6, Operating expenses by type, on page 54.

NOTE 16 Prepaid expenses and accrued income

	31 Dec 2019	31 Dec 2018
Accrued income	4,589	3,746
Prepaid services	795	816
Prepaid rent	0	3,343
Prepaid licenses	2,585	2,384
Prepaid insurance	686	565
Prepaid lease payments	491	222
Other prepaid expenses	267	358
Total	9,413	11,433

NOTE 17 Earnings per share

	Before dilution		After dilution
Earnings per share	2019	2018	2019	2018
Earnings per share, SEK	3.20	2.22	3.18	2.22

The calculation of earnings per share for 2019 is based on profit for the year of SEK 92,272 (64,240) and a weighted number of outstanding shares in 2019 of 28,872,600 (28,872,600) before dilution. After dilution effects, the weighted average number of outstanding shares is 28,972,688 (28,889,649).

Earnings per share after dilution

As of 31 December 2019, NOTE had issued share warrants on 1,111,000 (980,000) shares.

NOTE 18 Equity

	Share class A
No. of shares (thousands)	31 Dec 2019	31 Dec 2018
Issued as of 1 January	28,873	28,873
lssued as of 31 December–paid up	28,873	28,873

As of 31 December 2019 registered share capital comprised 28,872,600 shares with a quotient value of SEK 0.50 each. A repurchase of treasury shares was executed in late-2018, with 1 million shares acquired. Accordingly, after the repurchase, the total number of outstanding shares was 27,872,600. There were 1,111,000 (980,000) outstanding share warrants as of 31 December 2019. There were no other instruments with potential dilutive effect as of 31 December 2019. Holders of shares are entitled to dividends, and shareholdings entitle holders to votes at the AGM, at one vote per share.

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 2017-2019.

Reserves

Translation reserve	31 Dec 2019	31 Dec 2018
Opening translation reserve	8,207	3,154
Translation differences for the year	9,517	5,053
Closing translation reserve	17,724	8,207

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 2019	31 Dec 2018
Opening hedging reserve	16	–104
Forecast cash flow hedges for the year	–16	120
Closing hedging reserve	–	16

The hedging reserve includes the cash flow hedges whose effectiveness is partly tested in accordance with IFRS 9 Financial instruments 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.

A repurchase of treasury shares was executed in 2018, with 1 million shares acquired. The repurchase was charged to retained profits.

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%. At year-end, the equity to assets ratio was 41.2 (39.8)%.

Dividend policy

Each year, the Board of Directors will judge the level of share dividend that it considers optimal for the year. This may be distributed to shareholders in the form of dividends and/ or repurchase of shares. First and foremost, future dividend will be adapted to NOTE's investment need and financial position.

NOTE 19 Interest-bearing liabilities

Non-current liabilities	31 Dec 2019	31 Dec 2018
Lease liabilities attributable to property, plant and equipment	20,800	12,462
Lease liabilities attributable to right-of-use assets	38,114	–
Total	58,914	12,462

Current liabilities
Overdraft facility	–	19,086
Factoring	181,068	151,098
Short-term portion of bank loans	–	113
Short-term portion of lease liabilities attributable to property, plant and equipment	9,627	5,726
Short-term portion of lease liabilities attributable to right-of use assets	16,093	–
Total	206,788	176,023

Pledged assets

15,275 (15,043) 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 212,965 (212,879) in operations. Collateral for factoring is issued at an amount of 223,990 (195,251) in pledged accounts receivable–trade.

90% 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 30,846 (11,505).

Finance lease liabilities

Finance lease liabilities are due for payment as follows:

		2019		2018
	Minimi lease paymentsInterest Prinipal			Minimi lease paymentsInterest Prinipal
Lease liabilities attributa ble to property, plant and equipment
Within one year	10,259	–632	9,627	6,105	–378	5,726
Between one and five years	21,514		–714 20,800	12,804		–343 12,462
Total	31,773 –1,346 30,427			18,909		–721 18,188
Lease liabilities attributa ble to right-of-use assets
Within one year	17,290 –1,197 16,093			–	–	–
Between one and five years	31,396 –1,862 29,533			–	–	–
Over five years	9,060	–480	8,581	–	–	–
Total	57,746 –3,539 54,207			–	–	–

For more information, see Note 24 Financial risks and finance policy on page 61.

NOTE 20 Provisions and other financial liabilities

Long-term portion of other financial liabilities	31 Dec 2019	31 Dec 2018
Contingent portion of purchase consideration for acquisition	–	8,947
Total	–	8,947
Short-term portion of other financial liabilities	31 Dec 2019	31 Dec 2018
Contingent portion of purchase consideration for acquisition	6,107	–
Total	6,107	–

Short-term portion of provision	31 Dec 2019	31 Dec 2018
Other	623	579
Total	623	579

Other financial liabilities	2019	2018
Carrying amount at beginning of period	8,947	–
Provisions in the period	–	8,947
Amounts utilised in the period	–2,840	–
Un-utilised amounts reversed in the period	–	–
Carrying amount at end of period	6,107	8,947

NOTE 21 Other current liabilities

	31 Dec 2019	31 Dec 2018
Staff withholding tax	5,801	4,811
Social security contributions	4,490	3,817
VAT	16,673	10,252
Other	1,110	1,040
Total	28,074	19,920

NOTE 22 Accrued expenses and deferred income

	31 Dec 2019	31 Dec 2018
Accrued salaries and benefits	17,023	16,525
Accrued social security contributions	11,168	11,877
Accrued vacation payment	26,166	23,853
Other	17,263	20,858
Total	71,620	73,113

NOTE 23 Financial instruments by category

31 Dec 2019	Assets recognised at amortised cost	Derivatives used for hedging purposes	Liabilities recognised at amortised cost	Liabilities measured at fair value through profit or loss
Assets in the Balance Sheet
Accounts receivable–trade and other financial receivables	380,221	–	–	–
Cash and cash equivalents	72,619	–	–	–
Total assets	452,840	–	–	–
Liabilities in the Balance Sheet
Interest-bearing liabilities*	–	–	265,702	–
Other liabilities Contingent portion of purchase	–	65	–	–
consideration for acquisition				6,107
Accounts payable–trade and other financial liabilities	–	–	269,654	–
Total liabilities	–	65	535,356	6,107

31 Dec 2018	Assets recognised at amortised cost	Derivatives used for hedging purposes	Liabilities recognised at amortised cost	Liabilities measured at fair value through profit or loss
Assets in the Balance Sheet
Accounts receivable–trade and other financial receivables	327,216	–	–	–
Cash and cash equivalents	30,987	–	–	–
Total assets	358,203	–	–	–
Liabilities in the Balance Sheet
Interest-bearing liabilities*	–	–	188,485	–
Other liabilities Contingent portion of purchase	–	161	–	–
consideration for acquisition				8,947
Accounts payable–trade and other financial liabilities	–	–	273,599	–
Total liabilities	–	161	462,084	8,947

* Includes the group's lease liabilities for right-of-use assets and lease liabilities for property, plant and equipment financed with leases. They also constitute financial instruments, although are not in the categories stated in IFRS 9 Financial instruments, but are measured pursuant to IFRS 16 Leases for 2019, and pursuant to IAS 17 Leases for 2018.

For more information on financial instruments measured at fair value, see note 24 Financial risks and finance policy on page 61.

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 224 (195) 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% (1.6%) 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 at year-end.

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 465.2 (383,6) million of equity and interest-bearing liabilities of SEK 265.7 (188.5) million, utilised overdrafts of SEK – (–19,1) million are included. The un-utilised overdraft facility was SEK 116.0 (97.2) million at year-end. Financial liabilities comprise loans and the utilised portion of the overdraft and factoring facilities.

Maturity analysis, financial liabilities

31 Dec 2019, SEK millions	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*	181.8	93.7	57.2	30.7	0.2	–
Lease liabilities for right-of-use assets*	57.8	3.0	1.4	13.0	31.3	9.1
Lease liabilities for property, plant and equipment financed with leases*	31.7	0.3	2.0	7.6	21.8	–
Accounts payable–trade	269.9	174.4	85.1	10.4	–	–
Contingent portion of purchase consideration for acquisition	6.1	–	–	6.1	–	–
Total	547.3	271.4	145.7	67.8	53.3	9.1
31 Dec 2018, SEK millions	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*	171.4	101.8	29.9	34.0	5.7	–
Finance lease liabilities*	18.9	0.5	1.0	4.4	13.0	–
Accounts payable–trade	273.5	197.2	68.3	8.0	–	–
Contingent portion of purchase consideration for acquisition	8.9	–	–	–	8.9	–
Total	472.7	299.5	99.2	46.4	27.6	–

*Factoring and overdraft facilities are subject to estimated average interest of 1.6 (1.6) percentage points. A majority of these credits mature within three months. Finance lease liabilities are subject to estimated average interest of 2.2 (4.0) 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 193.1 (157.7) million at year end. There were no interest derivatives as of the reporting date, and accordingly, all interest

was variable.

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 allowance for accounts receivable—trade is SEK -6.4 (-8.5) million, and bad debt for the year is SEK 0.3 (0.5) million.

The ten biggest customers provide approximately 35% (47%) of sales. The group has a relatively good diversification of customers across a range of industrial sectors.

Age analysis, accounts receivable–trade	31 Dec 2019	31 Dec 2018
Not overdue accounts receivable–trade	286,162	273,554
Overdue accounts receivable–trade 0–30 days	75,234	37,068
Overdue accounts receivable–trade > 30 days–60 days	12,107	16,724
Overdue accounts receivable–trade > 60 days	6,718	–130
Total	380,221	327,216

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.

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. The finance policy stipulates that net exposure for 1-3 months should be 75-100% hedged, and net exposure for 4-6 months should be 0-50% hedged.

Allocation 6 months from the closing date

	Net exposure from sales and purchasing in foreign currencies		Total hedging		Percantage		Average exchange rate
	2019	2018	2019	2018	2019	2018	2019	2018
EUR	3,295	6,196	1,244	2,931	38%	47%	10.46	10.27
USD	10,965	13,516	4,646	6,334	42%	47%	9.32	8.98

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

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 2019	31 Dec 2018
Currency	Amount	%	Amount	%
CNY	111,094	23.9	102,176	26.6
EUR	98,957	21.3	74,525	19.4
GBP	112,524	24.2	88,328	23.0
NOK	2,799	0.6	2,711	0.7
Total	325,374	69.9	267,740	69.8

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.

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.

NOTE has a contingent portion of a purchase consideration from the 2018 acquisition of Speedboard Assembly Services Ltd. This should be measured at fair value on level three. The contingent portion of the purchase consideration is based on the performance of Speedboard Assembly Services Ltd. in the two years after acquisition. The contingent consideration will be paid fully if the company achieves a number of defined threshold values. The judgement as of 31 December 2019 remained that these threshold values are achievable for Speedboard Assembly Services Ltd., and accordingly the initial judgement of full payment of the contingent consideration was retained.

All financial assets in the Balance Sheet are recognised at amortised cost. All financial liabilities in the Balance Sheet, apart from the contingent portion of the purchase consideration stated above, are recognised at amortised cost. Because most of the financial assets and liabilities are current items, their carrying amounts are considered to correspond to fair values.

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
		2019	2018
Market risk, SEK million	+/– 2% +/– 5%		+/– 2% +/– 5%
Change in sales price to customers	27.7	69.2	21.5	53.8
Change in sales volume	6.8	17.1	5.6	14.0
Change in materials price*	17.6	44.1	13.4	33.5
Change in payroll overheads	5.7	14.2	4.7	11.8
Change in interest rates	3.0	7.6	2.5	6.1
Change in EUR/USD exchange rate on customer and supplier liabilities as of 31 Dec	1.4	3.6	1.3	3.2
Currency change on net assets in foreign subsidiaries	6.5	16.3	4.3	10.8

*Disregarding price adjustment clauses to customers.

NOTE 25 Pledged assets and contingent liabilities

Pledged assets for own liabilities and provisions	31 Dec 2019	31 Dec 2018
Property mortgage	15,275	15,043
Floating charge	212,965	212,879
Ownership reservation on machinery	–	115
Factored accounts receivable–trade	223,990	195,251
Total	452,230	423,288
Contingent liabilities
Guarantees issued	50,215	49,348
County administrative board, conditional loan	–	141
Total	50,215	49,489

NOTE 26 Cash Flow Statements

Interest paid	2019	2018
Interest received	497	1,046
Interest paid	–4,201	–908

Other non-cash items
Impairment losses	359	–2,819
Unrealised exchange rate differences	–700	–2,462
Other items not affecting liquidity	1,172	2,128
Total	831	–3,153
Cash and cash equivalents	31 Dec 2019	31 Dec 2018
Cash and bank balances	72,619	30,987
Un-utilised overdraft facilities	116,477	97,219

Total 189,096 128,206

	Liabilities for right-of-use	Liabilities for property, plant and equipment financed with	Other inte rest-bearing
	assets	leases	liabilities	Total
Opening balance 1 jan 2018	–	17,923	92,169	110,092
Cash flow effect	–	–6,137	74,498	68,361
Borrowings, non-cash	–	5,751	–	5,751
Acquisitions of subsidiaries	–	–	3,096	3,096
Exchange rate effects	–	651	534	1,185
Closing balance 31 Dec 2018	–	18,188	170,297	188,485
Opening balance 1 jan 2019	–	18,188	170,297	188,485
Restatement on adoption of IFRS 16 Leases	64,908	–	–	64,908
Restatement of opening balance 1 Jan 2019	64,908	18,188	170,297	253,393
Cash flow effect	–15,082	–7,176	8,937	–13,321
Borrowings, non-cash	4,450	19,133	–	23,583
Exchange rate effects	–69	282	1,834	2,047
Closing balance 31 Dec 2019	54,207	30,427	181,068	265,702

NOTE 27 Close relations

	2019	2018
Sale of goods and services to related parties	–	–
Purchases from related parties	–	–
Liability to related party as of 31 December	–	–
Receivable from related party as of 31 December	–	–

Transactions with related parties

Apart from the incentive programme for the company's CEO implemented in 2019, and some repurchase of share warrants issued in the incentive programmes introduced in 2017- 2018, no transactions with related parties were executed.

For more information on transactions with key staff in executive positions, see Note 8, Employees, personnel expenses and remuneration to senior management, on page 54.

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

In value terms, accounts receivable—trade and inventories were the largest asset items on the reporting date. Both these items are measured at net values after deducting for impairment, based on individual assessments. There is also a customer credit allowance for accounts receivable—trade based on computation from historical data and considering forward-looking information, pursuant to IFRS 9 Financial instruments. On the reporting date 31 December 2019, the reserve for obsolescence was SEK -20.7 (-18.2) million, and the allowance for doubtful debt was SEK -6.4 (-8.5) million. Information on the judgements applied and information on the risks associated with these asset items is in note 24 Financial risks and finance policy on page 61.

Goodwill

The group's goodwill is attributable to Swedish and foreign subsidiaries. Goodwill is tested for impairment pursuant to IAS 36 Impairment of Assets. As of 31 December 2019, the group's goodwill was SEK 109.9 (106.7) million. More information on the measurement of goodwill items is in note 11 Intangible assets on page 56.

Right-of-use assets, property, plant and equipment financed with leases and lease liabilities Right-of-use assets are the group's lease contracts for offices and production equipment. These contracts are signed for definite periods, and in most cases, also have extension options. How many lease terms are included in the supporting data for computation has a material impact on the size of this item. The judgement is that lease contracts on offices are reported over the contracted period. For production units, over and above the contracted period, extension options are also accounted in those cases where an extension facility exist in each contract, and this judgement is based on the business plans compiled should the initial lease term be at least three years, or longer if investments are made in production equipment with an estimated useful life of longer than three years.

Deferred tax assets

Deferred tax assets are recognised on loss carry-forwards to the extent it is likely that they can be used against future taxable earnings. The group's deferred tax assets consist mainly of provisions. On the reporting date 31 December 2019, the group's deferred tax assets were SEK 1.1 (1.9) million. More information on the group's deferred tax assets is in note 10 Tax on page 55.

NOTE 29 Acquisition

All the shares of Speedboard Assembly Services Ltd. of Windsor, UK, were acquired at month-end October 2018. Sales in the 12 months prior to the acquisition were just over SEK 155 million, with an operating margin of approximately 10%. Speedboard had about 100 employees. This acquisition consolidates NOTE's positioning on the UK market, and contributes to the positive development potential of NOTE's other operations.

Information on purchase consideration, acquired net assets and goodwill follows:

Assets and liabilities taken over on acquisition	2018
Total purchase consideration	91.3
Property, plant and equipment	7.2
Intangible assets—customer relationships	16.4
Inventories	52.8
Accounts receivable—trade and other current receivables	30.2
Cash and cash equivalents	2.5
Interest-bearing liabilities	–0.6
Other operating liabilities	–8.4
Deferred tax liability	–4.3
Non-current liabilities	–
Accounts payable—trade and other operating liabilities	–41.9
Acquired identifiable net assets	53.9
Goodwill	37.4
Total acquired net assets	91.3
Cash flow related to acquisitions in the period
Purchase consideration paid	82.1
Cash in acquired entity	–2.5
Net outflow of cash and cash equivalents	79.7

Transaction costs for the acquisition were approximately SEK 1.0 million, primarily relating to expenses for legal counsel another consulting. These expenses are recognised on the administrative expenses line of the Consolidated Income Statement in 2018, and are included in operating activities in the Cash Flow Statement for 2018.

Existing customer relations with a total value of SEK 16.4 million were identified in tandem with the acquisition. The goodwill of SEK 37.4 million arising in the acquisition mainly relates to the company's skills and processes in PCB manufacture and box build, as well as expected coordination gains with NOTE's other operations.

NOTE 30 Post-balance sheet events

The group has no significant events after the end of the financial year to report apart from the consequences of the spread of the coronavirus being hard to predict.

NOTE 31 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.

Order backlog – A combination of fixed orders and customer forecasts.

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	2019	2018
Net revenue		37,875	37,396
Cost of sold services		–15,676	–16,424
Gross profit		22,199	20,972
Selling expenses		–18,700	–21,312
Administrative expenses		–10,803	–12,301
Other operating revenue	2	14,513	4,627
Other operating expenses	3	–8,378	–4,910
Operating profit	4, 5, 6, 15	–1,169	–12,924
Profit from financial items	7
Profit from participations in group companies		71,375	41,448
Interest income, etc.		6,731	2,016
Interest costs, etc.		–2,159	–2,409
Profit after financial items		74,778	28,131
Appropriations	8	–18,800	–6,800
Profit before tax		55,978	21,331
Tax	9	–12,136	–4,532
Profit for the year		43,842	16,799

Parent Company Statement of Other Comprehensive Income

SEK 000	2019	2018
Profit for the year	43,842	16,799
Other comprehensive income
Items that can be subsequently reversed in the Income Statement:	–	–
Total comprehensive income for the year	43,842	16,799

Parent Company Balance Sheet

SEK 000	NOTE	31 Dec 2019	31 Dec 2018
ASSETS
Non-current assets
Intangible assets	10
Capitalised expenditure on development work		3,590	4,411
Property, plant and equipment	10	795	315
Financial assets
Participations in group companies	16	221,379	221,379
Receivables from group companies	11	148,776	79,876
Total financial assets		370,155	301,255
Total non-current assets		374,540	305,981
Current assets
Short-term receivables
Receivables from group companies		18,730	67,031
Other receivables	12	–	3,797
Prepaid expenses and accrued income		2,685	2,535
Total short-term receivables		21,415	73,363
Cash and bank balances	17	25,405	–5,732
Total current assets		46,820	67,631
TOTAL ASSETS		421,360	373,612
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		33,432	36,144
Profit for the year		43,842	16,799
Total equity		239,871	215,540
Untaxed reserves
Tax allocation reserve		25,600	6,800
Current liabilities
Liabilities to credit institutions		591	–
Accounts payable–trade		3,193	7,313
Liabilities to group companies		137,607	128,901
Tax liabilities		3,830	–
Other liabilities		566	514
Accrued expensed and deferred income	13	10,102	14,544
Total current liabilities		155,889	151,272
TOTAL EQUITY AND LIABILITIES		421,360	373,612

Summary Statement of Changes in Parent Company's Equity

SEK 000	Restricted equity			Non-restricted equity
	Share capital	Statutory reserve	Profit brought forward	Profit for the year	Total equity
Opening equity, 1 Jan 2018	14,436	148,161	32,557	54,311	249,465
Appropriation of profit			54,311	–54,311	–
Comprehensive income
Profit for the year				16,799	16,799
Other comprehensive income
– Total comprehensive income				16,799	16,799
Transactions with shareholders
Repurchase of shares			–21,851		–21,851
Dividend			–28,873		–28,873
Closing equity, 31 Dec 2018	14,436	148,161	36,144	16,799	215,540

	Restricted equity		Non-restricted equity
SEK 000	Share capital	Statutory reserve	Profit brought forward	Profit for the year	Total equity
Opening equity, 1 Jan 2019	14,436	148,161	36,144	16,799	215,540
Appropriation of profit			16,799	–16,799	–
Comprehensive income
Profit for the year				43,842	43,842
Other comprehensive income
– Total comprehensive income
Transactions with shareholders
Dividend			–19,511		–19,511
Closing equity, 31 Dec 2019	14,436	148,161	33,432	43,842	239,871

Parent Company Cash Flow Statement

SEK 000	NOTE	2019	2018
Operating activities	17
Profit before tax		74,778	28,131
Reversed depreciation		985	591
Other non-cash items		–77,494	–40,409
Tax paid		–4,511	–6,700
		–6,242	–18,387
Cash flow from change in working capital
Increase (–)/decrease (+) in trade receivables		–10,298	–1,768
Increase (+)/decrease (–) in trade liabilities		32,111	65,737
		21,813	63,969
Cash flow from operating activities		15,571	45,582
Investing activities
Purchase of intangible assets		–	–3,780
Purchase of property, plant and equipment		–644	–61
Purchase of financial assets		–5,279	–74,951
Cash flow from investing activities		–5,923	–78,792
Financing activities
Borrowings		591	–
Dividends paid		–19,511	–28,873
Repurchase of shares		–	–21,851
Group contributions received		40,409	31,300
Cash flow from financing activities		21,489	–19,424
Cash flow for the year		31,137	–52,634
Cash and cash equivalents
At beginning of period		–5,732	46,902
Cash flow before financing activities		9,648	–33,210
Cash flow from financing activities		21,489	–19,424
Cash and cash equivalents at end of period		25,405	–5,732

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 50, 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.

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

	2019	2018
Exchange gains on trade receivables/liabilities	14,513	4,544
Other operating revenue	–	83
Total	14,513	4,627

NOTE 3 Other operating expenses

	2019	2018
Exchange losses on trade receivables/liabilities	–8,378	–4,743
Other operating expenses	–	–167
Total	–8,378	–4,910

NOTE 4 Auditors' fees and reimbursement

	2019	2018
PwC
Auditing assignment	–510	–480
Auditing in addition to audit assignment	–	–
Tax consultancy	–	–
Other services	–	–92
Total	–510	–572

NOTE 5 Employees, personnel expenses and remuneration to senior management

Expenses for employee benefits	2019	2018
Salaries and benefits	–11,068	–16,975
Pension expenses, defined-contribution plans	–2,794	–4,129
Social security contributions	–5,353	–8,284
Total	–19,215	–29,388

Average number of employees	2019 of which men		2018 of which men
Sweden	11	53%	14	58%

Division between sexes in management	2019 Share of women	2018 Share of women
Board of Directors	43%	18%
Other senior management 3 (4) people	0%	0%

Salaries, other benefits and social security contributions

	Salaries and benefits (of which bonus)			Social security (of which pension expense)
	2019	2018	2019	2018
Management	–7,314	–12,751	–4,634	–7,624
	(–1,413)	(–1,497)	(–1,880)	(–2,911)
Other employees	–5,357	–5,488	–3,887	–5,131
	(–869)	(–330)	(–1,082)	(–1,372)

Management means the Board of Directors and the group management.

The figure for the previous year includes a provision for the company's previous CEO, who resigned in September 2018. For more information, see note 8 Employees, personnel expenses and remuneration to senior management on page 54.

NOTE 6 Operating leases

	31 Dec 2019	31 Dec 2018
Lease arrangements payable within one year	1,539	1,612
Lease arrangements payable between one and five years	573	916
Total	2,112	2,528

Parent company expenses for operating leases were 2,119 (2,006). 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	2019	2018
Dividend from group companies	–	1,038
Group contributions, received	72,325	40,409
Group contributions, paid	–950	–
Total	71,375	41,448

Interest income etc.
Interest income, group companies	3,490	517
Interest income, other	62	948
Exchange rate differences	3,179	551
Total	6,731	2,016
Interest costs, etc.
Interest costs, other	–888	–251
Exchange rate differences	–580	–1,581
Other	–691	–577
Total	–2,159	–2,409

NOTE 8 Appropriations

	2019	2018
Tax allocation reserve, provision/dissolved for the year	–18,800	–6,800
Total	–18,800	–6,800

NOTE 9 Tax

Reported in Income Statement		2019	2018
Current tax expense (–)/tax revenue (+)
Tax expense/tax revenue for the period		–12,136	–4,532
Deferred tax expense (–)/tax revenue (+)
Deferred tax revenue/expense in capitalised/utilised tax values of loss carry-forwards		-	–
Total reported tax		–12,136	–4,532

Reconciliation of effective tax %	2019	%	2018

Total		–21.7% –12,136 –21.2% –4,532
Tax attributable to previous years	0.0%	–16	–0.1%	–20
Non-taxable revenue	0.0%	0	1.1%	229
Non-deductible expenses	0.3%	–141	–0.2%	–48
Tax at applicable rate for parent company		–21.4% –11,979 –22.0%		–4,693
Profit before tax		55,978		21,331

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 2018	1,621	797
Purchases	3,781	95
Sales and retirements	–	–50
Closing balance, 31 Dec 2018	5,402	842
Opening balances 1 Jan 2019	5,402	842
Purchases	–	644
Sales and retirements	–	0
Closing balance, 31 Dec 2019	5,402	1,486
Depreciation
Opening balance, 1 Jan 2018	–568	–374
Depreciation for the year	–422	–169
Sales and retirements	–	16
Closing balance, 31 Dec 2018	–990	–527
Opening balance, 1 Jan 2019	–990	-527
Depreciation for the year	–822	-164
Sales and retirements	–	–
Closing balance, 31 Dec 2019	–1,812	–691
Carrying amounts
1 Jan 2018	1,053	423
31 Dec 2018	4,412	315
1 Jan 2019	4,412	315
31 Dec 2019	3,590	795

Depreciation is included in the following

Income Statement lines	2019	2018
Cost of goods sold and services	–766	–335
Selling expenses	–220	–248
Administrative expenses	–	–8
Total	–986	–591

NOTE 11 Long-term receivables

Receivables from group companies	31 Dec 2019	31 Dec 2018
Cumulative cost
At beginning of year	79,876	4,925
Purchase	5,280	79,876
Reclassification	57,501	–
Currency revaluation	6,119	–
Re-payment	–	–4,925
Total	148,776	79,876

NOTE 12 Other receivables

	31 Dec 2019	31 Dec 2018
Tax receivable	–	3,795
Other receivable	–	2
Total	–	3,797

NOTE 13 Accrued expenses and deferred income

	31 Dec 2019	31 Dec 2018
Accrued consulting fees	856	724
Accrued salaries and benefits	5,043	6,782
Accrued social security contributions	1,997	3,960
Accrued vacation payment	1,661	2,314
Other	545	764
Total	10,102	14,544

NOTE 14 Pledged assets and contingent liabilities

Contingent liabilities	31 Dec 2019	31 Dec 2018
Sureties in favour of subsidiaries	42,215	41,348
Total	42,215	41,348

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	2019	–	–	–	–
Company owned by Board member	2018	–	–	–	–

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 54.

NOTE 16 Group companies

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

		31 Dec 2019	31 Dec 2018
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
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
Speedboard Assembly Services Ltd, 04849220, Windsor, UK (100% owned by NOTE UK Ltd)	–	–	–
Total		221,379	221,379

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

Cumulative cost	31 Dec 2019	31 Dec 2018
At beginning of year	254,416	254,416
Investments	–	–
Divestment	–	–
Shareholder contributions	13,063	–
Total	267,479	254,416
Cumulative impairment
At beginning of year	–33,037	–33,037
Divestments	–	–
Impairment for the year	–13,063	–
Total	–46,100	–33,037
Net carrying amount	221,379	221,379

NOTE 17 Cash Flow Statement

Interest paid and dividend received	2019	2018
Interest received	3,490	1,465
Interest paid	–888	–251
Dividend received	–	1,039
Other non-cash items
Group contributions received/paid in the year	–71,375	–40,409
Unrealised exchange rate differences	–6,119	–
Total	–77,494	–40,409
Cash and cash equivalents	31 Dec 2019	31 Dec 2018
Cash and bank balances	25,405	–5,732
Un-utilised credit facilities
Un-utilised credit facilities	105,000	99,268

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 2019 comprise the parent company and its subsidiaries, collectively termed the group.

The Board of Directors and CEO hereby certify that the consolidated accounts have been prepared in accordance with IFRS as endorsed by the EU and give a true and fair view of the group's financial position and results of operations. The annual accounts have been prepared in accordance with generally accepted accounting principles and give a true and fair view of the parent company's financial position and results of operations. The Reports of the Directors of the group and parent company give a true and fair view of the group's and parent company's operations, financial position and results of operations and review the significant risks and uncertainty factors facing the parent company and group companies.

Johan Hagberg Kjell-Åke Andersson Anna Belfrage

Chairman Board member Board member

Kaj Falkenlund Bahare Hederstierna Claes Mellgren Board member Board member Board member

Charlotte Stjerngren Christoffer Skogh Board member Board member, Employee representative

Johannes Lind-Widestam

CEO Kista, Sweden, 20 March 2020

As stated above, the annual accounts and consolidated accounts were approved for issuance by the Board of Directors on 20 March 2020. 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 23 April 2020.

Our Audit Report was presented on 20 March 2020

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 2019.

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 2019 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 2019 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

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, customerspecific 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

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. We also perform sample inventory stock take for all significant entities.

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 1–27 and 35–37. 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 2019 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 25 April 2019, 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 Authorised Public Accountant Öhrlings PricewaterhouseCoopers AB

Stockholm, Sweden, 20 March 2020

Addresses

NOTE AB (publ) Borgarfjordsgatan 7 164 40 Kista Sweden

NOTE Components 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

NOTE Pärnu OÜ

Laki 2 80010 Pärnu Estonia

NOTE Torsby AB

Inova Park 685 29 Torsby Sweden

NOTE UK Ltd

Stroudwater Business Park Brunel Way Stonehouse GL10 3SX Gloucestershire UK

NOTE Electronics

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

Speedboard Assembly Services Ltd

1a Alma Road, Windsor SL4 3HU UK

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

NOTE AB (publ) Annual Report 2019 Corporate identity number 556408-8770

Text and graphic design: NOTE AB (publ). Production: NOTE AB (publ) and Redesign. Images: Thomas Hilland, David Lagerholm, Jann Lipka and Kavin Zhang. Printing: Billes Tryckeri AB. Translation: Turner Financial Translators Ltd.

AI assistant

NOTE — Annual Report 2019

3087_10-k_2020-03-24_f4f7b3a5-d5c9-4bf4-94cb-6a523bb868d1.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

Ordering financial information

This is NOTE

Key facts

Earnings per share before dilution

CEO's statement

Our historically best year ever

Future

Vision, business concept, strategy and targets

Vision

Business concept

A clear growth agenda with three main lines:

Financial targets

Profitability target

Dividend policy

NOTE's values

Committed

Proactive

Quality focused

Flexible

Business model

A partner with a strong, complete offering

Getting things right from the start creates value-added

Focused rationalisation work

Sustainability

Certifications

Value-creating partnerships with customers

Vicon Motions Systems – world leader in motion capture solutions

Market and competitors

NOTE is active on the market for outsourced EMS, which is continuously evolving due to the growing technology dependence in society.

Background

The market in 2019

Market trends, customer needs and future prospects

Competitors

Risk management

Sustainability

Timeline of NOTE's sustainability work

2011 NOTE joins UN Global Compact.

Global Goals for Sustainable Development

NOTE and sustainability

NOTE's sustainability objective

Environmental policy and working methods

2012

2013

2014

2015

2017

2018

Social conditions and human resources

Respect for human rights and anti corruption

Gender division group

Gender division managers

Gender division Board of Directors

UN Global Compact

NOTE has been a member of the Global Compact, which was started on a UN initiative, since 2011.

The Global Compact's ten principles

APPROACH

RESULT 2019

GOALS 2020

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

APPROACH

RESULT 2019

NOTE Annual Report 2019