HL display 06 eng...HL DISPLAY ANNUAL REPORT 2006 3 The year in brief THE YEAR IN BRIEF Net sales...

HL DisplayAnnual Report 2006

CONTENT

3 The year in brief

4 This is HL Display

6 Statement by the CEO

8 Business concept, objectives and strategy

11 Business processes Introduction

12 Core process 1 Sales and customer relations

14 Core process 2 Development, launch and product range management

18 Core process 3 Production and delivery of goods and services

21 Support processes

24 Market

28 Customer case study

30 The share

32 Risk and sensitivity analysis

33 Nine year summary

33 Definitions

34 Directors’ Report

The Group

36 Consolidated income statement

37 Consolidated balance sheet

38 Consolidated statement of changes in equity

38 Consolidated cash flow statement

The Parent Company

39 Parent company’s income statement

40 Parent company’s balance sheet

41 Statement of changes in the parent company’s equity

41 Parent company’s cash flow statement

42 Notes

61 Audit Report

62 The Board’s working practices

63 Board of Directors

64 Senior Executives

65 History

66 Financial Information

HL DISPLAY ANNUAL REPORT 2006 3

The year in brief

THE YEAR IN BRIEF

Net sales increased to MSEK 1,448 (1,285).Profit before tax was MSEK 92 (62).Earnings per share after tax amounted to SEK 7.87 (4.59).Equity per share amounted to SEK 50.10 (44.52) as of 31 December 2006.

Key ratios 2006 2005 2004Net sales, MSEK 1,448 1,285 1,249 Operating profit, MSEK 107 63 108 Profit before tax, MSEK 92 62 93Profit after tax, MSEK 62 35 47 Earnings per share, SEK 7.87 4.59 6.15Operating margin, % 7.4 4.9 8.6 Profit margin, % 6.4 4.8 7.4 Equity/assets, % 44.2 45.0 42.8 Equity per share, SEK 50.10 44.52 42.70 Average number of employees 949 933 967

4 HL DISPLAY ANNUAL REPORT 2006

THIS IS HL DISPLAY

HL Display’s customers

Retail sector companies (food and non-food) and brand manufacturerswho supply goods to the retail sector.

Production plants

Sweden (five factories, one jointly owned)UK (one factory)China (one factory)USA (one factory, jointly owned)

HL Display’s markets

The company has its own sales companies in29 countries of Western and Eastern Europe,and Asia. The largest individual markets arefound in France, UK and Sweden. Distributorsare used in a further 16 countries.

This is HL Display

AustriaBelgium China (Hong Kong)China (Shanghai)Czech RepublicFrance GermanyGreat BritainHungaryIndiaIndonesiaLatviaMalaysiaNetherlandsNorway

PolandRomaniaRussiaSerbiaSingaporeSlovakiaSloveniaSpainSouth KoreaSwedenSwitzerlandTaiwanThailandTurkeyUkraine

Retail companiesAhold (incl. ICA)AuchanCarrefourCasinoChampionIntermarchéMetroSystème UTescoWal-Mar t (ASDA)

Brand manufacturersBATDanoneColgateKraftL’OrealMaster foodsNestléPhilip MorrisProcter & GambleUnilever

Some of HL Display’s largest customersSales Companies

AustraliaBulgariaCanadaDenmark EstoniaFinland GreeceIceland

IrelandIsraelItalyKazakhstanLithuaniaNew ZealandPor tugalUSA

Distributors

HL Display leads the international market in the supply of products and solutions for in-storecommunication and merchandising to the retail sector. The company was founded in 1954 and by the end of 2006 it employed 947 people. HL Display has experienced annual growth of an average of 15.1 percent over the last ten year period and achieved net sales of SEK 1.4 billionin 2006. Since 1993, HL Display has been listed on the OMX Nordic Exchange.

Net sales MSEK

0

300

600

900

1,200

1,500

20062005200420032002

1,154 1,129

1,249 1,285

1,448

Operating profit MSEK

-20

15

50

85

120

20062005200420032002

76

-4

108

63

107


THIS IS HL DISPLAY

HL Display’s range of products

In-store communication: products andsolutions that ensure that consumers areable to find what they want in the storeas well as supplying all the necessaryinformation for a purchasing decision.

Merchandising: products and solutionsthat display the goods in the most attrac-tive manner to the consumers.

Category solutions: turnkey solutions fordisplay of goods within specific categories,for example frozen foods.

Benefits of HL Display’s solutions

They display goods in a manner thatenables consumers to find all informationnecessary, as well as tempting them to buy– central factors for increasing sales levelsin stores.

Create more clearly defined in-storecommunication which means that storesavoid lost sales due to consumers not locating the relevant goods quickly enough.

Streamlines activities in the stores whichcreates cost savings.

Profit margin %

-1

0

1

2

3

4

5

6

7

8

9

10

20062005200420032002

6

7

5

6

-1

Profit margin goal 10%Average number of employees

0

250

500

750

1,000

20062005200420032002

925975 967

933 949

The Nordic countries 274Western Europe 767Eastern Europe 281Asia and Australia 94North America 32

Net sales per region MSEK


STATEMENT BY THE CEO

Positive effects from measures

good example is that we have succeeded inincreasing the gross margin to 46.2 percentin spite of significant raw material price increases. In the summer we made thejudgment that the measures already taken were not sufficient for us to sustain results inparity with our profitability goal. Consequentlywe have identified a number of other areaswhere further measures are necessary.

In September 2006 we initiated therestructuring of our operations in Germany,which had been unprofitable for several yearsdue to pressure on market prices and highcost levels. Unprofitable customer contractsare being renegotiated and, if acceptabledeals can not be reached the contracts willbe cancelled. The regional service centre in Dutch Bergen Op Zoom has not beenshowing satisfactory profitability as it hasbeen oversized in relation to the actualmarket situation. This is generally due to thefact that the sales companies in Germany,Holland and Belgium have not developed asplanned. Consequently it was restructuredin January 2007 and is coordinated withthe service centre for Spain and France atSaint Avertin. In addition, 2007 will see asuccessive outsourcing of production fromour factory in Falun to selected suppliers.

Importance of growth marketsOur presence in growth markets such asRussia and the Asian markets plays anincreasingly important role for the Group asa whole. After several years of good levelsof sales growth, these markets are nowresponsible for a larger share of turnoverand we assess there are further opportuni-ties for continued growth here. This is verypositive, not least as in the long term thiswill even out the turnover differencesbetween regions as Western Europecurrently contributes the lion’s share. Theexpansion of these markets will decreaseour sensitivity to market developments inindividual regions. In addition, this year wehave expanded our Asian operations with asales company in India, a market full offuture potential.

Asia has also become increasingly impor-tant to us for other, strategic reasons. Ourproduction plant in China has been expanded

Last year, my first as Corporate CEO of HL Display, was exciting and important inmany ways. In the past years great emphasishas been placed on measures to reducecosts and streamline our operations. Nowwe can see that our hard work has begun tobear fruit. We have noted that our competitiveedge is strong, with a growth in sales of 13 percent. We also see the effect on ourearnings which have improved by 49 percent.

Even though we are pleased with thispositive development we are aware of thechallenges that lie ahead. HL Display willretain its position as market leader and willcontinue to be a company that others in thebusiness look up to. In order to achieve thiswe must continue to improve in all parts of our operations.

Cost efficiency is, for several reasons, an important part of this work. Primarily itstrengthens our competitiveness on themarket. We must be cost efficient if we areto capture new market shares and keep theones we already have. Secondly it decreasesour sensitivity to sales fluctuations. By beingcost efficient we can lower our break-evenlevel which enables us to remain profitablein times with slightly lower sales. Thirdly itis essential in order to achieve the earningslevels expected by our shareholders.

Further measures initiated I have concentrated this year on strengtheningand speeding up the streamlining of theorganisation. The measures taken to datehave been essential and successful. One

HL Display operates eight production plants.

The factory in the UK produces acrylic products.


STATEMENT BY THE CEO

during the year and is beginning to provideus with important advantages as concernsour European competitors. We currentlyalso have a Trading Manager in China whoworks actively with identifying and organizingactivities involving local sub-contractors.

However, our exciting sales developmentis not only connected to operations in rapidlygrowing markets. This year has also seenincreases in sales on most of our marketsin Western and Eastern Europe. We feel thatprice pressure in our business area is nowsomewhat less than before. This may partiallybe dependent on the fact that today’s highraw material prices make it difficult for ourcompetitors to decrease their prices.

Product development – vital competitive advantageHL Display invests more in product develop-ment than anyone else in the business.This brings us advantages as concerns ourcompetitors and we are able to createdemand from the market by offering newproducts that meet the needs of the custo-mers. In addition, we are further developingour existing products. For example, usingcustomer needs and quality requirementsas a basis, an analysis is made of whetherit is possible to make different choices asconcerns materials or to rationalise produc-tion. In the end this process means we areable to cut prices which makes our productseven more attractive.

New approach to productionOur philosophy and strategy concerningproduction has changed during the year.From previously manufacturing the majorityof our products in our Swedish factories wehave now concentrated Swedish manufac-turing to production methods where costefficiency is high. We will successively in-crease the amount of outsourced produc-tion, generating considerable savings. Wewill also review the preconditions for loca-ting more of our own production in low costcountries in order to decrease costs and toavoid high import duties in certain markets.This is complemented by continued develop-ment of our Chinese factory which is nowentering a new phase. Initially productionthere was destined for Asian markets only,now their products will be increasingly soldin Europe too.

We are also working on the establishmentof trading agreements within product areasthat are well suited to what we have to offer.One good example of this is the agreementwe have concluded with the American

company Trade Fixtures concerning theirsolutions for sales of goods by weight. Wehave noticed that the demand for thesesolutions has increased and currently enjoysole rights to the Trade Fixtures range onthe European market.

Rationalisation of product range a successThe work of rationalising our product rangehas produced effects in a very short periodof time. Our intention has been to phaseout unprofitable products and increase thesales shares of our standard products. Thiscreates many advantages for us includinglonger production series.

As a result we have been able to increasethe average order size and average salesper article as well as sales of standardproducts. We will speed up this processduring 2007 in order to further reinforcethese positive effects. However it is impor-tant to point out that this does not mean weare offering less to our customers. To agreat extent this concerns decreasing theextremely large number of variations withineach product. Simply expressed we are nowoffering the customer two solutions thatanswer their needs, instead of five.

Review of logisticsOne major activity for the next two-year period will be a total review of our logisticsprocesses in order to further improve costefficiency and level of service. Currently wemostly have both stock and administrativefunctions in each country. In 2007 we

intend to reorganise the logistics function,probably towards the establishment of regional units handling logistics, stock andadministrative functions for a number ofsales companies in the region. In January2007 we employed a Supply Chain Manager who will be responsible for designing andimplementing a new logistics function.

Prospects for the futureDuring the year I have had the opportunityto visit HL Display’s subsidiaries around the world in order to learn more about thecompany. The impression I gained during mytravels is that there is optimism and beliefin the future at HL Display, and I would liketo thank all our employees for their commit-ment and hard work on moving operationsforward towards an even better result.

I can observe that the hard work of thesepast years has strengthened HL Display. The preconditions for capturing new marketshares are in place and our growth shouldbe higher than market growth. For 2007,however, HL Display is not expecting salesgrowth on a level par with 2006. We will alsoactively explore opportunities to strengthenthe company’s offerings and market positionthrough acquisitions. I believe that we areon the right path and that, if we all pulltogether, our profitability goal of ten percentis within our grasp. Together we will have an exciting 2007!

Stockholm in January 2007Gérard Dubuy, CEO


BUSINESS CONCEPT, GOALS AND STRATEGIES

Focus on profitable growth

Business conceptHL Display’s business concept is to increase its customers’ profitability by offering the retail sector and its supplierscost-efficient display systems. Focus is to make the systems adaptive to the customers’ specific needs.

GoalsHL Display’s overall goal is to be a marketleading growth company with good profita-bility that provides good levels of valuegrowth for the shareholders. Profitabilitymust be prioritised.

The company’s financial goal is to achievea profit margin of at least ten percent.

StrategiesWith the aim of achieving the Group’s financial goals, HL Display operates according to the strategies listed below. HL Display will:– focus on the company’s core processes

and products– be perceived as a natural cooperating

partner by the world’s leading retailcompanies and their suppliers

– focus on design and innovation with the aim of setting new standards

– continuously streamline and adapt theorganisation to the needs and demandsof the market

– uphold the company culture and its focus on growth and change

– actively explore opportunities of strengthening the company’s offeringsand market position through acquisitions.

HL Display focuses on profitable growth, with strong emphasis on profitability. Thecompany creates growth through geographical expansion in pace with its customers’activities on new markets as well as through innovative product development whichcreates increased demand from customers. HL Display’s profitability focus is expressedin its activities to decrease both direct costs and operating expenses with the aim ofthe continuous improvement of operational efficiency.

Datastrip Slimline™ is manufactured in a large number of dif ferent designs

and makes it easy to place each price label next to the relevant product.



Comments on Group profit margin trendFrom the end of the 1990s until 2003, HL Display showed a negative profit margintrend. During the 1990s, HL Displayoperated a very clearly-defined growth strategy and growth was over 30 percent for several years. The organisation wasadapted to manage this strong growth with increased fixed costs as a result.

However at the beginning of this century,sales growth was considerably lower thanpreviously as a result of a tougher marketclimate. This affected profitability in a negative direction and culminated in 2003– the only year in HL Display’s history whenthe company made a loss.

Since then HL Display has made extensiveefforts to cut back on direct costs andoperating expenses. The profitability approach has reached every corner ofoperations and the ambition is to continueto be a company showing good levels ofgrowth, but not at the cost of profitability.

HL Display continues its work of fulfillingits financial goals in a sustainable fashionby continuously improving of all parts of itsoperations.

Research and development expensesAdministrative expensesSelling expenses

Expense distribution MSEK

0

100

200

300

400

500

600

20062005200420032002

469493 495

526561

Profit margin %

-1

0

1

2

3

4

5

6

7

8

9

10

20062005200420032002

6

7

5

6

-1

Profit margin goal 10%

HL Display makes life easier for store employees with its

well-constructed display solutions such as EasyShelf™.

››



Follow-up of 2006 and emphasis for 2007In its 2005 Annual Report, HL Display stateda number of focus areas for 2006. In thetable below a follow-up of these, plus thedirection for 2007, is given.

Outlook for 2007In the Nordic countries and in WesternEurope, HL Display has its largest markets.The markets are characterised by limitedgrowth and a high degree of competition. This

is why the last few years market investmentshave been directed to Eastern Europe andAsia. On these markets the growth rate ishigh and HL Display’s offer is competitive.

HL Display will actively investigate thepossibilities to boost the company’s offerand market position through acquisitions.Like in latest years, profitability will be prioritised and the financial objective of 10 percent profit margin is within reach. For 2007 HL Display is not expecting to

see the same sales growth as in 2006.A detailed forecast of earnings and turn-

over for the entire year will be providedtogether with the 3Q 2007 QuarterlyReport. Short lead times from order to delivery and an order stock that primarilyconsists of many, small-scale orders makeit difficult to provide a relevant forecast forperiods longer than one quarter. The majorityof orders during the course of a month areinvoiced the month immediately following.

Continued work on evaluating

the product range to generate

increased efficiency in production

and logistics.

Positive effects in the form of incre-

ased average order size, increased

average sales per article and incre-

ased sales of standard products.

Intensified product range evaluation with the aim of reinforcing the positive

effects achieved in 2006. A second phase of product range rationalisation

was initiated on January 1, 2007. The measures are expected to have

effect on profits in the second quarter of 2007 at the earliest.

Focus Area for 2006 Result 2006 Focus Area for 2007

Increased intensity in work

to limit operating expenses

throughout the Group and to

guarantee the best possible

resource utilisation.

Operating expenses, excluding freight

charges and one-off costs, increased

by 3.6 percent. Revenue increased by

13 percent (please refer to table on

operating expense development).

Continued efforts to limit operating expenses throughout the Group and

to ensure best possible resource utilisation. In addition, HL Display will

further increase focus on profitability issues in sales companies that are

currently making a loss. The aim is to at least reach break even in these

companies in 2007.

To evaluate and improve the

efficiency of the sales process

and the sales companies.

The establishment of Area

Manager positions has brought

the sales companies closer to the

parent company. Control of sales

companies using a key ratio

system has been introduced and

is continuously followed up.

Continued efforts to evaluate and streamline the sales process and the

sales companies. A new CRM-system is being implemented to improve

customer relations and allow cost savings through more efficient routines.

In addition, a Sales Manager has been appointed to further strengthen

the execution and follow-up of the sales work.

Continued work to develop

production, in terms of both

technology and materials.

New methods for production

planning have been developed with

the aim of full exploitation of

unused resources and achieving

even utilisation levels. Start up of

production in China.

Continued work with production development concerning technology

and materials, as well as relocation and outsourcing opportunities.

HL Display will continue to invest in the Chinese factory in order to

increase production capacity.

Further development of EDI

solutions both within the company

and with end customers.

EDI utilised to an

increasing degree.

As a result of the work conducted during recent years, EDI is now a natural

part of the everyday activities. Further development work is therefore not

of strategic importance.

To increase the proportion of

direct deliveries from factory

to end customer.

Has not produced desired cost

efficiency gains.

HL Display will implement a total review and reorganisation of its logistics

function. A Supply Chain Manager was recruited in January 2007.

The Supply Chain Manager will design the new logistics function for

implementation during the fourth quarter of 2007.

OCH – one of HL Display’s solutions enables

the display of cylindrical products where product

information is often given on the lid.

››

››››

››››


BUSINESS PROCESSES INTRODUCTION

Customer

Core Process 3Production and delivery of goods and services

Core ProcessesHL Display’s core processes manage the entire chain

from purchase to customer cooperation

Support Processes

Core Process 2Development, launch and product range management

Core Process 1Sales and customer relations

Economy and Finance

IT

Human Resources

Core processes and support processes

HL Display has defined the business processes that manage its coreoperations as three core processes. These are complemented by threecorporate support processes.

In-store and price communications are an impor tant

par t of any store. Slimline™ datastrips include a wide

range of accessories aimed at increasing sales.

HL Display has divided its operations intothree, central core processes. Throughclear control and follow up of activitieswithin each core process, HL Display willensure that the right things are done in allparts of operations.

Core process 1 concerns all activities, planning and operative activities connectedwith sales and customer relations. Please read more on pages 12-13.

Core process 2 concerns all activitiesconnected to HL Display’s products andsolutions, from product range developmentand marketing to product range manage-ment and phasing out. Read more on pages 14-17.

Core process 3 concerns everything to dowith production, purchasing and logistics.More information on pages 18-20.

As a complement to this, HL Display runsthree processes that support operations in the core processes. These are Economyand Finance, IT and Human Resources. Read more on pages 21-23.


CORE PROCESS 1 SALES AND CUSTOMER RELATIONS

HL Display’s business model is based onstrong local presence and position throughits own sales companies on the relevantmarkets. In spite of the fact that the actorson the food retail market consist of multi-nationals to a considerable extent, a veryminor share of purchasing of the productsand solutions supplied by HL Display iscarried out centrally. Local presence andcustomer contacts are consequently decisivefor continued successful sales activities.

Towards increased profitabilityHL Display applies central control and followup of sales company operations in order tosupport the work of achieving the company’sprofitability goal.

All sales companies are allocated clearlydefined goals in terms of key ratios that arecontinuously monitored. Currently salescompanies are assessed according to theirability to fulfil goals concerning:– growth– gross margins for the three customer

segments: food retail, non-food retail and brand manufacturers

– operating expenses in relation to total sales

– profit margin.

In practice this means that the primaryfocus of the sales companies is profitability.Growth remains an important part of thestrategy, however higher sales volumes mustnot be bought at the cost of profitability.

Area managers plan and control operationsIn order to support improved coordinationand enhance the control of operations, HL Display introduced some changes to thecompany’s organisation during the first halfof the year. The six Area Managers nowhave full budget and result responsibility fortheir countries. They are also responsible foroperational planning and control with the

HL Display’s sales are carried out by its own 30 sales companies in 29 countriesin the Nordic region, Western and Eastern Europe and in Asia. These salescompanies are complemented by distributors who work in another 16 countries.

Local presence key to successful sales activities

Together with international customers, HL Display

adapts products to the dif ferent environments, as

here using acrylic stands to display glass plates.


CORE PROCESS 1 SALES AND CUSTOMER RELATIONS

Operational emphases for 2006

– To intensify focus on profitable growth in sales companies through clearly stated goalsand continuous goal attainment monitoring. During the year HL Display has formulated goals for its sales companies based on fivekey ratios which are continuously followed up.

– To increase efficiency in sales through a corporate support system within CustomerRelations Management. A CRM system has been developed during the year aimed at structuring up and improvingall phases of work with current and potential customers.

– To establish methods for increasing sales via catalogue and Internet.The extensive, common product catalogue will be replaced by catalogues adapted to each country. This solution has been tested in France, UK and Sweden with encouragingresults. In addition, 2006 saw the test launching of a new webstore in UK.

– To strengthen sales focus on core products.As part of its focus on core products, during the year HL Display has regained marketshares in the shop fitting segment. In addition, special bonus goals have been establishedfor all sales company MDs concerning the sales of Slimline™ and EasyShelf ™, which arethe latest innovations within the datastrip and shelf divider fields.

aim of achieving the profitability goal. This is complemented by the appointment

of a Business Manager with global respon-sibility for the development of the brandmanufacturer customer segment – an area where HL Display feels that there isadditional potential.

Group systems support sales activitiesHL Display’s key account managers beartotal responsibility for customer relationson the local market, irrespective of whetherthe activity concerns product sales or morecomplex projects. HL Display supports itssales companies with tools aimed at thestreamlining and improvement of sales activities, including a web-based trainingcourse and the introduction of a Group CRM system (Customer RelationshipManagement) that creates structured routines for all phases of this process.

Catalogue and Internet salesDuring the year HL Display has continued towork with HL Direct in order to enable incre-ased sales using the existing organisation.The primary tools used in HL Direct aresales via catalogue and Internet. Theseservices are complemented with access toqualified sales staff on the phone so thatcustomers can receive rapid response onmatters that would previously have requireda visit from a salesperson in the field.

The extensive, common product cataloguewill be replaced by country-specific cataloguescontaining a standard range and certainoptions for each country. This solution hasbeen tested in France, UK and Sweden withencouraging results so the new catalogueswill be successively introduced onto allmarkets in 2007.

Sales via Internet is, in principle, virginterritory for HL Display. In the spring of 2006a new Internet webstore was introducedinto UK and the results of this project willform the basis of any further HL Displayinvestment within this field.

HL Display is one of the

leading, world suppliers of price

communications solutions.


CORE PROCESS 2 DEVELOPMENT, LAUNCH AND PRODUCT RANGE MANAGEMENT

HL Display offers…HL Display offers its customers products forin-store communication and merchandisingas well as total solutions for display of entirecategories of goods known as categorysolutions.

In-store communicationWithin this competence area HL Displayoffers products that ensure that the consumeris able to find the desired product quicklyas well as receives all the necessary infor-mation for a purchasing decision. By usingwell organised in-store communication, thestores avoid losing sales because the consu-mers cannot find what they are looking for,or the price of the product, in the store.

MerchandisingWithin this competence area HL Displayoffers products that present goods in thebest possible manner to consumers andtempt them to purchase, which is a decisivefactor for increasing sales in a store.

HL Display’s products for merchandisingalso enable cost cutting as work in thestore is streamlined. One example of this is the automatic forward feeding of goodswhich means that less time is used to keepshelves in good order at the same time asthey can be rapidly filled with new products.

Category solutionsWithin this competence area HL Displayoffers complete display solutions for entirecategories of products such as Frozen Foodor Confectionary. In addition to attractivemerchandising and clear presentation ofrelated information, for example any type of environmental or organic labelling, acategory solution ensures that the store’splanogram is followed. A planogram is adrawing that shows where all the differentitems are to be placed in each store.

Positioning of offerHL Display shall be the natural cooperatingpartner for retailers as concerns strengthe-

ning the purchasing experience for theconsumer. The company differentiates itselffrom its competitors primarily as concerns:

Innovation – HL Display’s investment in product development has no equal in the business.

Quality – The quality of the products mustnever need to be questioned.

Competence – With its 50 years of experience, HL Display has built up extensiveexpertise as concerns displaying goods in stores.

Customer focus – HL Display’s local marketpresence creates closeness to the customerand a high level of service.

Rationalisation and differentiation of product rangeAt the end of 2005, HL Display initiatedactivities aimed at rationalising, classifyingand setting price differentials on thecompany’s extensive product portfolio of

Global offer to retailers

Segment

Retail Non-food

Products

Retail Food

Category Solutions

Do It Yourself Chilled FoodIn-store Communication, for exampleHL Datalist (shelf-edge strips)

and HL Frames (display frames)

Merchandising, for exampleHL Optimal™ (shelf-divider systems)

and HL Optirack™ (product merchandisers)

Confectionary

Helth & Beauty

Frozen Food

Tobacco

Sports

Electronics

Drugstores/Beauty shops

HL Display offers a complete range of products and solutions for in-store communicationand merchandising. HL Display places great emphasis on managing and developing itsrange of products in order to improve offerings to existing customers, reach new customers and increase efficiency in production.

HL Display’s extensive product range forms the basis of what the company offers its customers. Customers in the

food retail sector are also offered complete category solutions for entire product categories. HL Display’s product

range for the non-food retail sector focuses initially on four segments, and in due course there is good potential to

develop the range to include more and more category solutions.



over 100,000 articles. The primary goal ofthese measures was to achieve increasedefficiency of production through longerproduction series and to streamline logis-tics flows.

Price differentiationInitially HL Display concentrated on phasingout products showing low profitability andon decreasing the number of product varia-tions through standardisation of, for example,colour and length. As part of this processHL Display has introduced a clear pricedifferentiation of products. The company’sproducts are divided into three groups:– standard– modified standard, (for example a

standard product in a special colour)– special

The pricing of products follows the degreeof specialisation.

Basic and plus product rangeIn order to strengthen sales of standardproducts, HL Display has defined a basicrange that is to be offered by all salescompanies. The requirement for this basicrange is that it must contain a completerange of products that are able to meethigh levels of demands from customers,irrespective of where they are in the world.Each sales company can then include additional products in the form of a plusrange that suits their particular market.

Positive effectsHL Display continuously follow up themeasures that has been initiated. Resultsshows that average order size and averagesales per article have increased. In additiona considerable increase in the share ofstandard products sold has been observed.

HL Display has not lost any sales or anycustomers as a result of this streamlining

Operational emphases for 2006

– To rationalise and differentiate the company’s current, extensive product range. The work involved with rationalising the range of products has generated positive effects during the year. Both the average order size and average sales per article have increased. In addition, sales of standard products have increased.

– To utilise partnership and trading as a method of strengthening product range within product areas that dovetail well into what HL Display has to offer.During the year HL Display has strengthened its range of products with solutions designed to display sales by weightgoods in collaboration with the US company Trade Fixtures.

– To enhance competitive edge of offers through value engineering.During the year this has become a natural part of product range development. HL Display has been able to streamlineproduction of several products which eventually means lower prices and more attractive offerings to customers.

The shelftalker plays a key role in the promotion of impulse

purchases, which in turn creates increased sales.››



HL Display’s work with the development ofits product range is based on three elements:– product development – value engineering– partnership and trading.

Product developmentHL Display’s product development is organi-sed at two competence centres, one forextrusion and one for injection moulding. Inaddition there is a marketing unit consistingof product managers at HL Display. Theseare responsible for identifying and initiatingdevelopment projects. However the finalresponsibility for development strategy anddecisions concerning new products lies witha Marketing Council which consists of themembers of HL Display’s Executive Groupamong others.

HL Display is concentrating its productdevelopment to products manufactured byextrusion or injection moulding – two produc-tion techniques in which HL Display posses-ses leading edge competence. A clear costfocus is integrated into product development.The ambition is to optimise quality based onthe product’s area of application, while acompetitive final price is a basic requirementfor all new products that are developed.

All development activities commissionedby customers – adapted solutions based on HL Display’s existing products – arecarried out by HL Design, a corporateresource located in France. HL Designpossesses considerable competenceconcerning successful customer specificproduct development.

Value EngineeringValue engineering is a central concept inthe work of product range development. HL Display continuously reviews its productrange in order to identify the volumeproducts where the company’s competitiveedge must increase. Based on customerneeds and quality requirements, an analysisis carried out as to whether, for example, itis possible to make other material choicesor to rationalise production. This processenables cost cutting and price reductions,which increases the company’s opportunitiesto capture additional market shares.

During the year HL Display has launchedseveral new and further developed productsincluding EasyShelf ™ Lite – an extension of the EasyShelf ™ solution – and Slimline™

shelf edge strips especially adapted toelectronic price labels. Three percent ofturnover was invested in product develop-ment, the same proportion as last year.

of its product range. Instead many custo-mers have appreciated the opportunities forshorter delivery times and lower prices forstandard products.

Next stepBased on the results of these evaluations,HL Display has taken a decision to continueworking with its product range, primarily inorder to create longer production series inits factories. Consequently increased standardisation within the product groupDatastrips will be carried out as variation is most common in this area.

Development of product rangeHL Display’s ambition is to lead the marketas an actor who continuously develops thebusiness with innovative products that createobvious added value for customers.

Automatic product feeding on shelves

promotes both sales and the degree

of efficiency in the store.

››



Partnership and supplier cooperationHL Display’s close cooperation with its custo-mers means that the company is able toidentify new needs for products and solutionsat an early stage. When products are wellsuited to HL Display’s product range, butfall outside its core competences extrusionand injection moulding, the company’s aimis to supply customers with these productsand solutions through partnerships orthrough sub-contractors. HL Display is anattractive partner to these suppliers due toits market presence with sales companiesor distributors in 46 countries.

During the year HL Display entered into apartnership agreement with the US companyTrade Fixtures concerning their solutions forsales of goods by weight – an area in whichdemand has increased substantially during

recent years. HL Display owns exclusiverights to their product range on the Europeanmarket.

Patent and protection of designsHL Display reviewed its patent strategyduring the year, not least against the back-ground of the high cost levels associatedwith patents. The current patent strategy isaimed at protecting high level sales productswithin the core competences of extrusionand injection moulding. At the end of theyear HL Display owned 70 (179) registeredpatents with 50 (75) patent applications inthe pipeline. Six new patents were takenout in 2006. There were 104 (110) patentsregistered with another 11 (10) applicationsin the pipeline. Total costs for these activitiesamounted to MSEK 2 (3) in 2006.

Systems for more rapid product launchingEfficient product launching is essential ifnew products are to impact the market asrapidly as possible. As a rule HL Display’snew products are launched at the sametime on all markets. This means that thecompany must rapidly reach out to its salescompanies all around the world with thenecessary information. In order to increaseefficiency and impact in this process HL Display has been working on a web-basedtool that combines product expertise withsales training for the product in question.The main products launched during the yearwere EasyShelf ™ Lite, a new shelf dividersystem where the dividers and fittings caneasily be released and adjusted, plus BulkBins, a system for sale of goods by weight.

Illustration new products – EasyShelf ™ Lite

EasyShelf ™ Lite enables all shelf dividers to be moved sideways which creates time savings when

changing the store’s planogram or when introducing new merchandise onto the shelf. Due to further

development of material and production technology EasyShelf™ Lite can be offered at the same

price levels as the more traditional solution based on the Optimal™ shelf divider system. Customers

now receive a more innovative and flexible solution.


CORE PROCESS 3 PRODUCTION AND DELIVERY OF GOODS AND SERVICES

HL Display’s production has undergoneconsiderable transformation during the lastfew years with the aim of continuouslyimproving efficiency. Previously, generallyspeaking all HL Display’s products and solu-tions were manufactured at the company’sown factories. However, currently HL Displayis concentrating its production to the produc-tion methods where the company can showleading edge competence and efficiency.Consequently certain production is sub-contracted out. HL Display still, however,produces the majority of the products soldby the company. Work with the evaluation ofproduction is continuously underway andconcerns material and production technologyas well as location.

Coordinated productionOne major area of activity during the yearhas been aimed at improving the efficiencyof production plants, which has resulted inincreased through-flow of production andimproved productivity, increased utilisationof resources, lower staffing levels andconsequently a narrower, sharper coststructure. Another area of interest has beenthe coordination of production. The aim has

been to create cost advantages by developingmethods for rapid shift of production betweenthe various factories. As a first step, a newproduction organisation has been launchedwhose aims include coordinating productionservice functions independent of productionlocation. Utilisation of the expert resourcesavailable within these service functions, suchas production technology, will consequentlybecome more efficient as in the future theseexperts will form a corporate productionresource. These measures will become fully operational during 2007.

Expansion in ChinaThe production plant started up in Suzhou,Northwest of Shanghai, has expandedduring the year. Currently there are threeproduction lines operating and anotherthree under construction. The factory wasinitially intended to produce shelf edge stripsfor Asia and Australia. However, during the year HL Display has moved certainproduction processes from Karlskoga andSundsvall to Suzhou, so that the Chinesefactory is currently also producing for theEuropean market.

InvestmentsHL Display has previously taken a decisionto outsource part of its production at theFalun plant and specialise operations thereto automatic bending and screen printing,two methods in which the factory currentlymaintains a good level of efficiency. Duringthe year HL Display took a decision to investmore in these production methods in orderto further strengthen their competitive edge.

Injection moulding of shelf dividers inSundsvall is one of the competence areasin which HL Display is on the leading edge.During the year a production plant for totallyautomated manufacture of shelf dividers hasbeen commissioned, which has led to consi-derable streamlining in this production field.

Coordinated production improvesutilisation of resources

Operational emphases in 2006

– To concentrate and reinforce production using production methods in which HL Display possesses leading edge competence and efficiency.This year production investments have only been made in production methods where HL Display already enjoys, or has the opportunity to achieve, leading edge efficiency in the market.

– To increase coordination between the company’s production facilities to benefit from economies of scale and achieve increased efficiency and productivity.During the year the foundation of a new production organisation has been laid with the aim of developing the ability to rapidly move production between factories and benefit from cost advantages.

– To apply outsourcing of production that is considered to lie outside the company’s core production competence.HL Display took a decision to successively outsource production from its factory in Falun.

HL Display operates eight production plants of which five arelocated in Sweden. Each production plant is specialised in oneor two production methods.

››



Lead time (in days)Average lead time from order to deliveryProduction facility Target Result 2006 Result 2005Sundsvall 9 13 10 Falun 10 11 11 Karlskoga 7 7 n/a

Delivery performance (as a percentage)Defines the proportion delivered within the agreed delivery timeProduction facility Target Result 2006 Result 2005Sundsvall 98.0 95.0 97.5 Falun 96.0 97.0 94.9 Karlskoga 98.0 98.0 n/a

Proportion of complaints (as a percentage)Refers to the number of complaints in relation to the total number of ordersProduction facility Target Result 2006 Result 2005Sundsvall 0.3 0.5 0.8 Falun 0.6 0.7 1.6 Karlskoga 0.3 0.2 n/a

Yield per machine for the two most important production technologies (as a percentage)Refers to the time that the machine is in productionExtrusion Target Result 2006 Result 2005Sundsvall 91 81 85

Injection moulding Target Result 2006 Result 2005Sundsvall 93 90 85 Karlskoga 93 86 n/a

QualityHL Display operates an ambitious qualityprogramme at its production facilities.Detailed quality targets are followed upevery month. There are quality systems atall production facilities structured accordingto the international quality standard ISO9001. The plants in Falun, Sundsvall andKarlskoga are currently certified accordingto ISO 9001, and the aim is that in duecourse all plants will be certified.

Extrusion – High Speed

On the High Speed line, shelf edge strips suitable for rapid production

are manufactured.

Sundsvall Extrusion

This production method presses melted plastic through

a nozzle. The profile of the nozzle forms the cross

section of the product. Products are extruded in strips

that are then cooled in water baths and cut to the

required lengths. Shelf edge strips are examples of

products manufactured using this production method.

HL Display production lines Location Method

Extrusion – Flexible

On the Flexible line mature products are made – often in many different varia-

tions – and the process is characterised by short series and rapid changes.

Sundsvall

Injection moulding

In this production method, melted plastic is injected

into a hollow mould. The shape of the mould

determines the product’s appearance. Shelf dividers

and frames are examples of products manufactured

using this method.

Extrusion – Complex

On the Complex line newly developed shelf edge strips are produced as

well as strips that combine several materials or functions.

Sundsvall

Screen printing and bending

Screen printing of plastic sheets, which in many cases

are further refined through punching or cold/hot bending.

Extrusion – High Manning Rate

In addition to production for Asia and Australia, the factory manufactures

standard articles and labour-intensive products for Europe.

Suzhou (China)

Injection moulding – Dividers

The primary product is shelf dividers of transparent plastic material that

are produced on integrated, robot injection moulding lines.

Sundsvall

Injection moulding – Frames etc.

In the Karlskoga factory injection moulding of frames and accessories

in plastic is carried out.

Screen printing and bending

The major products are screen printing and bending of shelftalkers.

Other production

In Shipley, UK, acrylic display stands are produced using cold and hot bending. HL Display Pictoria in Falkenberg makes poster frames in metal.

In a joint venture in Lesjöfors (jointly owned with Trion Industries) metal display hooks are manufactured while at Wilkes-Barre, Pennsylvania,

USA (also jointly owned with Trion Industries) products are extruded for the US market.

Karlskoga

Falun



Totally, corporate investments in productionplant amounted to MSEK 24 (34) this yearof which the majority consisted of tools forextrusion and injection moulding.

Raw materialsDuring the year HL Display has continuedits work with the development of the variousplastic materials used in its products as wellas qualifying new raw material suppliers forthe factories. This may enable both lowercosts for raw materials and increasedproductivity as certain materials permitmore rapid production processes.

LogisticsWork with streamlining of production planthas been in focus this year which has alsoincluded the strategically vital task of mana-ging and developing the product range.Consequently, the foundations have also

been laid for the further development of theHL Display logistics function, which will beone of the main areas of activity in 2007.Currently there is, in most cases, one ware-house site per country. During the year thetrend has been towards the establishment ofregional, central warehouses. This is alreadythe case in Singapore which supplies theentire Asian market and in France which, from2007, will function as a central supplier alsofor Spain, Germany, Holland and Belgium.

Environmental activitiesHL Display’s environmental activities arebased on the company’s environmentalpolicy. The work is undertaken locally underthe leadership of an Environment andQuality Manager at each production plant.This person initiates and follows up day-to-day environmental activities and individualprojects. Two of HL Display’s productionplants operates under duty of notification to authorities. In the Falun factory due to thefact that a certain solvent is used for screenprinting. However the use of this solventhas decreased radically as water-based UVprinting is currently used for practically allscreen printing. The other concerns thepowder coating facility in Falkenberg.

Environmental certificationHL Display’s largest production plants locatedin Sundsvall, Karlskoga and Falun, havebeen certified according to ISO 14001.These factories are responsible for approxi-mately 90 percent of the products manufac-tured by HL Display. The company’s ambi-tion is that all production plants are to gaintheir ISO 14001 certificate.

Waste materialThe major part of HL Display’s environmentalimpact comes from PVC waste from produc-tion. HL Display’s long term aim is that allPVC waste will be recycled. The Swedishfactories currently sell around 70 percent oftheir PVC waste, plus practically all otherplastic waste, for recycling. At the Karlskogaplant certain material is recycled directly orindirectly in the factory’s own productionprocess and at the newly started produc-tion plant in Suzhou, China in principle allPVC waste material is sold for recycling.This trend is not only positive from an envi-ronmental perspective but also decreasescosts for HL Display. In 2007 the aim isthat the extrusion and injection mouldingprocesses will decrease their share ofdumped and combustible waste productsby 60 percent through the recycling of newfractions of waste products.

Recycled Recycled waste waste in relation

Year (tonne) to total waste (%)2006 926 812005 768 732004 698 762003 599 70

Energy utilisationHL Display’s operations are electricity inten-sive. In order to decrease energy utilisationa system has been introduced at HL Display’sproduction plant in Sundsvall to utilisewaste heat from machines to heat up thebuilding. This has been successful so thebuilding now only uses waste heat and theuse of district heating, which previouslyamounted to 2,000 MWh annually, hasbeen eliminated. HL Display is examiningthe opportunities to offer waste heat forsale to other businesses.

At the factory in Suzhou, HL Display hasintroduced a sealed water system for thewater pools used to cool down shelf edgestrips after production. This has meant thatwater can be recycled which has decreasedconsumption considerably.

Placing dif ferent accessories close to the goods means

that brand manufacturers can reinforce their brand.

››


SUPPORT PROCESSES

Business projects concern the developmentprojects initiated within the IT field. Speci-fications for these projects maintain a highlevel and focus to a considerable degree onthe benefits they generate for operationsincluding lower costs, more efficient routinesand enhanced quality.

One central component of the IT environmentis the ERP system Jeeves. Currently 35 ofthe Group companies are connected toJeeves and the intention is that, in the longrun, all subsidiary companies will work witha common ERP system. Business supportapplications such as stock control, e-invoicesand Customer Relations Management arealso linked to Jeeves.

One important area in 2006 has been thedevelopment of a CRM system that is tightlyintegrated with the Jeeves ERP system. Clearroutines have thus been created for allphases of work with the customers whichensures that any customer information available within HL Display can be utilisedby everyone in the Group. In addition a newintegration platform has been built up whichenables alterations to the system and facili-tates the introduction of new applications.IT costs amounted to a total of MSEK 35(35) in 2006.

Economy and FinanceThe financial function within HL Display is responsible for four areas: accounting,controlling/MIS, in-house bank/financeactivities plus Group accounting and investor relations.

HL Display requires a high quality level of accounting in all group companies.Consequently the financial functions of thesmallest companies have often been out-sourced until they have become large enoughto motivate an in-house finance resource.Currently the emphasis is increasingly onthe coordination of accounts and controllingfor several countries in regional servicecentres, following the logistics organisation.

ITThe use of modern information technologyis a prioritised area for HL Display, not leastas it is an essential tool for the streamliningof both business and in-house processes.The IT environment at HL Display maintainsa high standard in terms of usability, acces-sibility and security.

HL Display’s work within IT primarilyconsists of three parts: efficient production,active management and business projects.

Efficient production concerns the IT systemscurrently in use. The company’s goal is todecrease costs for operations and mainte-nance of these systems by 10 percentannually, which is to be achieved via conti-nuous improvements and modifications.Results for the last five years have been an average of 9 percent per year.

Active management concerns applicationscalled enablers for example databases andmail systems, plus infrastructure. Simplyexpressed, HL Display will secure maximalbusiness benefit through continuous impro-vements within these areas.

Support processes

Controller function increasingly importantThe controller function is becoming increa-singly important in pace with geographicalexpansion. Regional service centres andlarge-scale individual companies will eachbe staffed with a regional controller respon-sible for controlling, follow up and MIS. Inaddition there are controllers with globalresponsibility who also work with operationaldevelopment, often as the link betweenoperations and the IT function. BusinessProcess Re-engineering (BPR) is a teamwhose task is to identify and implement efficient working methods and routines inthe Group’s various companies. BPR willalso ensure that guidelines for in-housecontrolling are followed as well as providingsupport for users during the introduction or development of the business systemJeeves into the subsidiaries.

HL Financial Services (HFS) is HL Display’sin-house bank. HFS bears responsibility formanagement of currency risk and all corpo-rate financing. HFS is also a service centrefor the Swedish production companies asconcerns management of accounts receivableincluding netting, as well as for scanningand e-authorisation of suppliers’ invoices.In 2006 a procurement of banking services,including an international cash pool, hasbeen carried out. The aim is to concentratethe majority of the corporate financial flowsand balances so that it becomes possibleto net a deficit in one currency against a sur-plus in another. This advanced solution willdecrease the Group’s future financing costs.

Corporate accounting and investor relations HL Display maintains a high level of ambitionas concerns external reporting and makesspecial efforts to report swiftly without anydecrease in quality. The company’s approachto the market is to be transparent andhonest. Since 1998, the Group’s financialposition is reported to the market on amonthly basis. HL Display became theSwedish Listed Company of the Year in2005, and in the same year its annualreport were awarded an honourablemention in the OMX Nordic Exchangecompetition entitled Best Annual Report(smaller company class).


SUPPORT PROCESSES

high levels of expectations on the manager’srole, also achieve high levels as concernsoperative and business results. This clearlyillustrates the importance of good manage-ment at all levels in the company. HL Displayintends to further strengthen companymanagement by increasing managementsupport and opportunities for furthereducation within the field.

Management planningHL Display has a stated ambition thatmanagement and international positionswill primarily be filled via in-house recruit-ment. In order to strengthen its recruit-ment base of future managers, this year HL Display focussed on more systematicallyidentifying and developing the managerswho possess the force and potential to takegreater responsibility – either within the rolethey have today or in a new managerialposition. This process will be complementedby the “fast track positions” currently avai-lable within HL Display. The individuals who are recruited to these positions shouldpossess the capacity to move up into newlevels within the company.

EmployeesEmployees who wish, and are able, to in-fluence operations in order to achieve evenbetter results are essential if HL Display isto achieve its goals. Offering employeesgood conditions of employment and oppor-tunities for continuous development iscentral to stimulate motivation and commit-ment at all levels of the company.

Importance of good managementThe management of the company plays adecisive role for how employees perceivetheir working situation and the results achieved in each company. The results of HL Display’s employee satisfaction survey –HL Dialog – shows that personal leadershipis more strongly linked to motivation, loyaltyand performance than any other factor.Managers are expected to communicateand gain acceptance for goals and supplyemployees with clear feedback as well asacting as the driving force in continuousactivities to change and improve operations.The managers who respond to the company’s

Average number of employees

0

250

500

750

1,000

20062005200420032002

925975 967

933 949

Number of years employed %

>24 years 120-24 years 215-19 years 410-14 years 185-9 years 30<5 years 44


SUPPORT PROCESSES

Web-based trainingHL Display’s intranet is the primary imple-ment for in-house training as operations arespread over a large number of countries.Employees are offered training concerningHL Display’s operations plus more specificprofessional inputs, primarily different typesof sales training. Via intranet, employeeshave been able to test their levels of English.Results show that there is a need for trainingin this field and HL Display is currentlyevaluating a number of training methodsthat will be offered to the employees.

Preventive health care – lower sick leave ratesHL Display has undertaken long-term, healthpromotion activities with the aim of preven-ting ill health at an early stage. Activitiesinclude offering employees regular healthprofiles followed up by health advice andpersonal development plans.

A long term health project was started upat the company’s largest production plant inSundsvall, Sweden this year. The aim wasto radically decrease sick leave by offeringtraining programmes on nutrition and exer-

cise and by carrying out fitness tests andhealth profiles accompanied by individualdevelopment plans. Approximately 80 per-cent of the staff have chosen to participatein the project and results to date have beenencouraging. Sick leave rates have alreadydecreased by around 1.5 percentage points.

This year HL Display has also intensifiedits work with the rehabilitation of employeeson long-term sick leave. These activities arecarried out together with occupational healthcare and the National Social InsuranceOffice and have resulted in long-term sickleave decreasing by one third. Costs forpreventive health care amounted to MSEK 2.0 (1.2) in 2006.

Facts On 31 December 2006, there were 947 (914)employees within the company. During theyear the average number of employees was949 (933) and staff turnover was 7.6(14.6) percent. The workforce consists of37 percent women and 63 percent men.

40 percent of the company’s employeeswork within sales and marketing, 42percent with production and warehousing

and the remainder with management, administration and product development.45 percent are employed in Sweden while31 percent of employees have a universitylevel education, 53 percent upper secondarylevel and 16 percent secondary level.

Value added per employee amounted toKSEK 453 (510) in 2006. Investment instaff training during the year cost MSEK 1.9 (2.1), which is the equivalent of SEK1,933 (2,237) per employee.

Health risks within HL Display are minor and primarily related to production.Preventive measures are taken in an effortto provide secure workplaces with goodworking environments. In 2006 a total of15 (10) incidents were reported, all wereminor. There have been no deaths due to workplace accident in the history of HL Display.

Target fulfilment

HL Display’s ambitious

aims create a result-

oriented corporate culture.

Targets are set high, and

create positive challenges

for the company and its

employees. Day-to-day

activities are characterised

by an insistent striving

towards target fulfilment.

HL Display’s fundamental values

Trust and respect

HL Display also emphasises

the importance of open,

honest dialogue within the

company. Showing trust in

all employees and an atti-

tude that everyone is doing

their best for the company

combined with a stated

policy of maintaining and

developing a good, honest

business ethic.

Drive

Problems must be solved

where and when they arise.

Personal drive is encour-

aged. The basic idea is that

everyone must have the

competence and the ability

to deal independently with

their daily tasks. This is in

line with the company’s

entrepreneurial heritage.

Commitment

Successful managers lead

by example by showing

commitment in day-to-day

activities, while at the

same time retaining

an overall view of the

business. The ability to

set a good example is

an important element

of daily management.

Non-prestigious

The company’s employees

are non-prestigious.

Results are more important

than job titles, and the

company’s heroes are

those involved in

day-to-day activities.

Employee categories No. of persons

Production 316Administration and management 118Warehouse 85Product development 49Sales and marketing 379

Age distribution

0

50

100

150

200

250

300

350

400

60-51-6041-5031-4021-30-20

7

306

376

191

60

9

Value added per employee KSEK

0

100

200

300

400

500

600

20062005200420032002

463

399

514 510

453


MARKET

Good sales growth

HL Display offers products and solutions forin-store communication and merchandisingon an international market. Customersprimarily consist of retail companies, brandmanufacturers and shop fitting companies.

HL Display currently sells its products in45 countries, in 29 countries through itsown sales companies and in 16 countriesvia distributors.

Factors that affect HL Display salesHL Display sales are affected to a conside-rable degree by the market situation withinthe retail sector, especially in food retail.Important factors affecting demand for HL Display’s products and solutions include:– the number of new stores– the number of re-profiled stores– shifts in technology, e.g. the introduction

of electronic price labels– the company’s own product development.

The after sales market forms an importantpart of total sales. In this area demand isfairly stable and consists of spare partssales and additional sales as stores regularlycarry out remodelling and renovation work.

Market size and competitionHL Display faces an extremely fragmentedcompetition situation, both as concernsmarkets and products. There is no indepen-dent estimate of the size of the worldmarket for in-store communication andmerchandising. The fact that many supplierson this market are smaller, unlisted compa-nies makes it difficult for HL Display tocalculate the size of the global market.

HL Display’s in-house estimates put thecompany’s market share for the establishedmarkets for products HL Datalist and HL Optimal™ at 30-50 percent.

There is no competitor to HL Display withthe same global presence or with a productrange that is as broad. Neither does anycompetitor sell category solutions that areas well developed. Competition is, however,strong within every product area and HL Display faces different competitors ondifferent markets and for different products.Consequently the number of competitors isconsiderable, around 150 companies whichmeans it is impossible to establish any rele-vant division in terms of market shares.

Globalisation and consolidation – a lookback at market developmentsDuring the last decade, developments withinthe retail sector have been characterised byconsolidation and globalisation. Major chainshave grown using mergers and acquisitions,and by establishing themselves on new,attractive markets at a rapid pace. One ex-ample of this is the fact that approximately45 of the worlds 250 largest retail companiesoperate in more than ten countries.

The retail chains that have been most

HL Display operates on an international market and sells its products in 45countries. In 2006, sales growth amounted to 13 percent, as sales developmenthas been good on most of the company’s markets.

››

A simplified division

of competitors would

result in the following

three groupsCompete with HL Display in some indi-

vidual product areas, for example frames.

Companies in this group are often

large with a broad scale of operations

which means that they compete with

HL Display in some of their niches.

1. International actors

(operate on >5 markets)

2. Regional actors

(operate on 2-4 markets)

3. Local actors

(operate on one market)

Checkpoint Systems (USA)

Oechsle (Germany)

– Well developed product range

within its niche.

– Efficient production process.

– Low price levels.

– Full range of products that

answer all customer needs.

– Offers complete category solutions.

– Considerable investment in product

development which gives leading

position.

– Good relationships with end

customer in contrast to competitors

who often work through agents

and distributors.

Compete with HL Display in one or

two product areas.

AL-Display (Germany)

Visioplast (France)

Wilson & Brown (Poland)

– Often family firms with low

overheads.

– Flexible production processes

for short series.

– Good contacts with customers

in the region.

– Full range of products that answer

to all customer needs.

– Offers complete category solutions.

– Through its global presence,

HL Display is able to follow its

large scale customers when they

expand and can therefore become

a preferred supplier.

Compete with HL Display in full

solutions. Majority of competitors

in this category.

Kleerex (Ireland)

PPE (England)

– Extremely good customer contacts.

– High degree of individual

customer adaptation.

– Large-scale, global retail companies

and brand manufacturers value a

supplier who can help them on

many markets.

– Considerable investment in

product development which gives

leading position.

Example

Strengths

HL Display’s

competitive

advantages


MARKET

active globally are those with relatively smallhome markets where expansion opportunitieshave been limited. Geographical expansionhas been a means of creating growth andenjoying economies of scale. This is oneimportant reason why, for example, Frenchand German chains are among the mostglobally active while American and Japanesechains have expanded geographically to alesser degree.

The expansion of the big chains has beenmost observable in Asia and Eastern Europeand many markets in these regions arecurrently dominated by them. The large-scale,most easily accessible markets have beenthe location of the first stage of this expan-sion. Expansion into these regions hasbecome possible in pace with these growthcountries opening up their economies toforeign investments.

Current market situationThe retail sector has developed well, generallyspeaking, in 2006 largely due to increasedconsumption as compared to the previousyear. It is currently dominated to a conside-rable degree by regional or global chains, and

geographical expansion is still a strong trend.However, this is not an automatic recipe forsuccess. There are several examples ofcompanies who have exited certain marketsas outcome did not reach expectations.During the last few years geographicalexpansion has also become more commonwithin the specialist store sector includinghome appliances, clothing and DIY (Do-it-yourself) chains. Around thirty chainsexpanded into new markets in 2005 alone.

The largest store format, hypermarkets,is also the largest in terms of growth on thefood retail market, especially as they workso well on growth markets. The smalleststore format, convenience stores, alsoshows good growth. Consequently the mostcommon store format, supermarkets, nowhas competition from both larger and smaller stores.

Continued growth opportunitiesAsia is the largest region in terms ofnumber of growth markets and is currentlyresponsible for approximately 30 percent ofglobal retail sales. China continues to be anattractive market with annual, retail sector

growth of around 10 percent. However thismarket is beginning to mature as a result ofthe expansion of global chains. More than40 chains have established themselves inChina to date and most of them have largescale future expansion plans. In addition,domestic chains such as Linhua, ChinaResources Enterprises and Beijing Hualianare also showing extremely forceful growth.

During the last few years India has begunto attract the interest of the big chains andis considered to be a market of the future.Its large population, good GNP growth and aretail market anticipated to expand by morethan 10 percent annually are importantfactors in this picture. In addition, the fivelargest retail chains have a market share of only one or two percent of the modernretail market.

Many markets in Eastern Europe are begin-ning to approach saturation point as a resultof the expansion of the last few years. Russiais the largest and most rapidly growing marketin the region. Annual growth on the retailmarket has been around 20 percent forseveral years. Expansion is extensive justnow and more retail chains are on their way

››

››

Western Europe

Net sales MSEK 767

As in the Nordic countries, HL Display maintains

a strong market position in Western Europe.

HL Display supplies approximately 95 percent of

the major retail companies and is also a leading

supplier to brand manufacturers. As was the case

last year, price pressure is great on many of

HL Display’s products and solutions. Efficiency

measures have increased HL Display’s competi-

tive edge so that this situation does not present

any serious threat on these markets. Sales in

the region have increased by 3 percent during

the year.

Sales Companies

Austria

Belgium

France

Germany

Great Britain

Netherlands

Spain

Switzerland


MARKET

into the country. In addition, interest hasturned to new markets such as Ukraine.

General trendsDiscount has been the dominant trend onthe food retail market for several years andis currently the basic theme of most marketactors. Stiff competition from hard discountactors has pressed down prices and anyprofits from streamlining in companies areoften reinvested in the form of reducedprices. The discount concept has proved tobe extremely successful on most marketsand actors such as Aldi and Lidl have beenable to drastically expand their operations.

This means different demands for HL Display. Among other things demand for

HL Display’s products for sales by weighthave increased.

Store trends that affect HL DisplayMore clearly defined segmentation andcross merchandising, two in-store trendsthat became visible in 2005 have continuedto grow in importance during 2006. Withclear segmentation, food retailers make iteasier and faster for customers to shop inthat they indicate clearly where the variousgoods are in the store. For HL Display thishas meant increased demand for segmen-tation products such as shelftalkers andaisle signage.

Cross merchandising means that itemsthat are closely connected, for example

The Nordic countries

Net sales MSEK 274

HL Display’s market position in the Nordic

countries is strong. HL Display is the leading

supplier of products and solutions for in-store

communication and merchandising to both the

retail sector and brand manufacturers. Sales in

the Nordic countries increased by 18 percent

during the year as operations on the two

largest markets, Sweden and Norway,

developed well.

Sales Companies

Norway

Sweden

Eastern Europe

Net sales MSEK 281

HL Display is today a leading supplier to food

retailers and brand manufacturers in Eastern

Europe, largely thanks to the fact that the

company established operations in many

countries in the region at an early stage.

Growth this year has been considerable as

a result of increased sales to both retailers

and brand manufacturers. After the good levels

of sales growth during these years, Eastern

Europe is becoming an increasingly important

market for HL Display. Sales in the region

increased by 29 percent this year.

Sales Companies

Czech Republic

Hungary

Latvia

Poland

Romania

Russia

Serbia

Slovakia

Slovenia

Turkey

Ukraine

Distributors

Denmark

Finland

Iceland Distributors

Greece

Ireland

Italy

Portugal

Distributors

Bulgaria

Estonia

Israel

Kazakhstan

Lithuania

›› pasta and pasta sauces are displayedtogether. This facilitates for the consumerand enables increased sales for the store.The trend towards increased crossmerchandising is growing and increaseddemand for suitable display solutions canconsequently be observed.

Sales development in 2006HL Display’s sales totalled MSEK 1,448 in2006, which is an increase of 13 percenton last year. Sales have increased on mostof the company’s markets without any indi-vidual, large scale deals affecting the figures.In addition, HL Display has been able tobenefit from earlier investments in newmarkets made in previous years.


MARKET

Asia and Australia

Net sales MSEK 94

HL Display’s market position has been strengt-

hened in Asia during the last few years.

Operations in the region have developed extre-

mely well this year and show the greatest sales

growth. Consequently Asia, as with Eastern

Europe, will become an increasingly important

market for HL Display. Pace of growth and future

potential vary, however, between the countries

of the region.

To an increasing degree the Asian markets are

being supplied with products from the factory in

Suzhou, China and the aim is to continuously

decrease the amount of products shipped from

the Swedish factories. A sales company has

been established in India this year, a country

where HL Display has already sold a certain

amount. India is a very large market with good

development potential, even if it will probably

take some time. Sales in Asia increased by

39 percent in 2006.

Sales Companies

China (Hong Kong)

China (Shanghai)

India

Indonesia

Malaysia

Singapore

South Korea

Taiwan

Thailand

North America

Net sales MSEK 32

Trion Industries is responsible for all sales

work in the US market. At present sales work

is targeted exclusively at retail companies.

Sales in the North American market amounted

to MSEK 32 during 2006.

Sales per customer segment MSEK

Retail food 613Brand manufacturers 267Retail non-food 243Shop-fitters 157Distributors 110Other 58

Distributors

Australia

New Zealand

Distributors

Canada

USA

HL Display’s range of display hooks includes

anti-theft systems and semi or fully automatic

feed, together with price display accessories.


CUSTOMER CASE STUDY

Super U Kingersheim

Last year the store was forced to closetemporarily as an unusually heavy snowfallhad damaged the roof of the building.Management decided to take this opportunityto expand and renovate the store.

HL Display was chosen to supply themajority of in-store communication andmerchandising solutions, including therecently launched merchandising systemEasyShelf ™ Lite and shelf edge systemSlimline™. One important reason for Super U choosing HL Display was that the range of products available fulfilled their needswithin several areas – everything fromsignage to display systems for frozen food.

Colour coding was a vital part of the inte-rior themes chosen to improve the segmen-tation within the store. Consequently it wasessential that HL Display was also able tofulfil specific demands as concerns shelfedge strip colours.

The cooperation with Super U inKingersheim continues. HL Display’srecently introduced solution for sales ofgoods by weight will be installed in thisstore. The newly re-opened store inKingersheim, and the solutions supplied byHL Display, have also excited considerableinterest among other Super U stores, espe-cially the colour coded solutions providedby Slimline™.

HL Display’s wide range of products and ability to adapt solutionsto customer needs meant that it was first choice for Super U inKingersheim, France.

Super U in Kingersheim, a town locatednear the Swiss border, is part of SystèmeU, France’s sixth largest retail chain withover 850 stores all over the country.Système U has been an important custo-mer of HL Display in France for a conside-rable period of time.

Their store in Kingersheim is located in alarge, busy shopping centre that hosts agood number of high profile shops. Super Uin Kingersheim is consequently an importantstore and is regarded as something of aprofile store for Système U in this part ofFrance.

Colour coded Slimline ™ shelf edge strips for the

dif ferent sections of the store in Kingersheim

strengthen the identity of each category of goods.


CUSTOMER CASE STUDY

ARC International

ARC International is currently one of theleading world manufacturers of tablewarewith brands such as Cristal d’Arques,Luminarc, Pyrex, Mikasa and Studio Nova in their portfolio. These products are distributed in 160 countries and are soldthrough a number of different channelssuch as hyper and supermarkets, and inspecialist stores.

ARC has now started up a new distributionchannel in France – their own stores by thename of ARC International. The companyturned to HL Display in order to developsolutions for in-store communication andmerchandising for the test store that wasopened in 2006 in Rosny-sous-Bois outside Paris.

HL Display supplied various types ofsignage systems in order to display in-storeinformation, as well as solutions for presen-ting goods in an attractive manner, such asdisplay stands for plates and glass. Thesolutions HL Display presented createdseveral advantages that were much appreci-ated by ARC International. Flexibility meantthat solutions could be used on differenttypes of shelves and stands at the sametime as they saved considerable amountsof space on the shelves. High levels of func-tionality also allowed quick, easy installa-tion into the store.

This test store has been very successfuland ARC International now plans to open anumber of new stores over the next fewyears. In addition, as a result of its successhere, HL Display has also been chosen assupplier for a new store concept started upby ARC – Entrepôt Destockage – factoryshops. Ten such shops were opened in2006 and more are planned for 2007.

When the French company ARC International took the decision to open their own stores they turned to HL Display to help themmerchandise their goods in the best possible manner.

The founder of the company Harr y Lundvall also spent time

tr ying to figure out how plates could best be displayed.

ARC International uses HL Display’s latest solution.


THE SHARE

The HL Display share

The HL Display share has been listed on the OMX Nordic Exchangesince 1993. As at 31 December 2006 the share capital in HL Displaytotalled SEK 38,635,860, divided among 7,727,172 shares, ofwhich 913,024 are class A shares and 6,814,148 class B shares.Each share has a quota value of SEK 5. Class A shares carry onevote and class B shares 1/10 of a vote. All shares provide equalentitlement to a share of the company’s assets and profits. A blockof shares amounts to 100 shares.

Share price developmentSince its Stock Exchange launch, the share’s value has increasedby 1,180 percent from SEK 14.37 (corrected for bonus issues) toSEK 184 on 31 December 2006. During the same period the SIXGeneral Index increased by 358 percent. In 2006 the price rose by31 percent, while the SIX General Index recorded an increase of 24percent. The highest price paid during the year for the HL Displayshare was SEK 185, and the lowest SEK 121.50. At the end of2006 HL Display’s market capitalisation reached MSEK 1,254.

Trade volumesDuring the year 713,087 shares were traded at a value of MSEK101, corresponding to a turnover rate of 10.4 percent.

ShareholdersAs at 31 December 2006 the number of shareholders was 1,942(2,128). The proportion of institutional shareholders is estimated at56 (55) percent of capital and the proportion of foreign shareholdersis 2 (1) percent.

Option schemesThere are currently two option schemes aimed at employees inupper management positions in Sweden and abroad. In 2006 theAnnual General Meeting took a decision to issue 75,000 employeestock options to the incoming CEO Gérard Dubuy as a part of hisremuneration package. The opportunity to convert these into sharesis dependent on his continued employment plus the achievement of certain profit goals for the Group. 10,900 warrants remain froma previous programme aimed at senior executives within the Group.When fully subscribed, the option schemes represent a total of 1.1percent of share capital and 0.6 percent of votes in HL Display. Ifthe warrants are fully subscribed, the number of shares will amountto 7,813,072. The warrants have been issued on commercial terms,defined in accordance with the so-called Black & Scholes valuationmodel, and the purchase price was paid in cash. Utilisation ofsubscription rights is not subject to continued employment.

Dividend policyAs HL Display is now prioritising profitability and the underlying cashflow is estimated to be healthy, in future a more aggressive dividendpolicy will be adopted. In the long term the Board is striving to achievea dividend proportion corresponding to 30-50 percent of the profitper share after tax.

DividendFor the financial year 2006 the Board proposes a dividend of SEK3.50 (3.00) per share, equivalent to 44 percent of earnings pershare after tax.

Share price trends

1994

20

50

100

200

400

600

800

1,000

150

200

250

B-shareSIX General IndexNumber of shares traded, thousands (incl. after-hours)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

SIX

Foreign owners 2Swedish unit-trusts 16Swedish institutions 40Swedish private owners 42

Shareholder structure %


THE SHARE

Option schemes

Number of employee Number of Proportion of share Proportion of votesYear implemented stock options warrants capital if fully subscribed if fully subscribed Subscription price Subscription period2006 75,000 – 1.00% 0.50% 157 2007-01-01--2011-03-312003 – 10,900 0.14% 0.07% 86 2005-06-01--2007-06-29Total 75,000 10,900 1.14% 0.57%

Ownership structure on 31 December 2006

No. of shares No. of shareholders No. of shares % of shares1 - 500 1,557 206,511 2.7501 - 2,000 298 308,158 4.02,001 - 10,000 57 255,880 3.310,001 - 50,000 12 275,150 3.650,001 - 100,000 8 558,500 7.2100,001 - 10 6,122,973 79.2Total 1,942 7,727,172 100.0

Data per share 1), 2),3)

2006 2005 2004 2003 2002 2001 2000 1999 1998 1997Earnings per share after tax, SEK 7.87 4.59 6.06 -1.31 5.71 7.22 3.48 4.20 5.81 5.65Earnings per share after

dilution and tax, SEK 7.85 4.58 6.05 -1.31 5.71 7.22 3.48 4.20 5.81 5.65Dividend per share, SEK 3.504) 3.00 2.50 1.65 1.65 1.55 1.40 1.30 1.30 1.20Dividend, % of earnings after tax 43.7 67.4 41.2 -125.5 28.9 21.5 40.2 31.0 22.4 21.2Share price end of period, SEK 184.00 141.00 137.00 111.00 91.00 128.00 73.00 161.00 205.50 187.00Equity per share, SEK 50.10 44.52 42.70 38.10 41.08 36.89 31.07 28.89 26.00 21.39Equity per share,

after dilution, SEK 49.99 44.40 42.60 38.05 41.06 36.89 31.07 28.89 26.00 21.39Direct yield, % 1.9 2.1 1.8 1.5 1.8 1.2 1.9 0.8 0.6 0.6P/E ratio, 31 December 23.39 30.72 22.59 -84.43 15.94 17.73 20.99 38.35 35.37 33.08Operational cash flow per share, SEK 16.57 4.58 10.26 4.12 8.62 5.51 1.28 3.99 -1.11 5.02

No. of shares 7,727,172 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872Weighted-average no. of shares 7,693,508 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872Weighted- average no. of shares, diluted 7,710,959 7,709,538 7,707,139 7,700,360 7,692,389 7,688,872 7,688,872 7,688,872 7,688,872 7,688,872

1) See page 33 and note 14 for definitions of key ratios.2) Data per share corrected for the bonus share issue in 1997. 3) Years 1997-2003 not restated according to IFRS.4) According to the Board’s proposal.

Largest shareholders, 31 December 2006No. of No. of Totalt Share of No. of Share of

A shares B shares of shares capital, % votes votes, %The Remius family and company 803,808 1,599,148 2,402,956 31.1 963,723 60.4Ratos AB 109,216 2,115,854 2,225,070 28.8 320,801 20.1Lannebo fonder – 734,185 734,185 9.5 73,419 4.6Livförsäkringsaktiebolaget Skandia – 494,812 494,812 6.4 49,481 3.1Didner & Gerge mutual fund – 366,900 366,900 4.8 36,690 2.3SIF – 117,100 117,100 1.5 11,710 0.7Invus Investment AB – 82,800 82,800 1.1 8,280 0.5Göran Källebo – 80,400 80,400 1.0 8,040 0.5Lars Olof Jonsson – 78,800 78,800 1.0 7,880 0.5Länsförsäkringar småbolagsfond – 57,600 57,600 0.8 5,760 0.4Richard Moser – 55,200 55,200 0.7 5,520 0.4Others – 1,031,349 1,031,349 13.3 103,135 6.5Total 913,024 6,814,148 7,727,172 100.0 1 594,439 100.0


RISK AND SENSITIVITY ANALYSIS

Risk and sensitivity analysis

Sensitivity analysisEffect on operating

Factor Change profit/loss, MSEKNet sales 1% volume 6.7Price of PVC 1% 0.9Price of polycarbonate 1% 0.3Price of electricity 1% 0.1Cost of personnel 1% 3.2Interest rates 1 percentage point 0.8Depreciation 1% 0.4Euro exchange rate 1% 2.4

Raw material sensitivityPlastic raw materials constituted 67 percent of the Group’s rawmaterial purchases in 2006. The major raw material, PVC, wasresponsible for 35 percent the Group’s total raw material costs. The price of PVC is currently extremely high and, in 2006 reachedits highest recorded level. Customer agreements are generally renegotiated once annually and price adjustment clauses coveringraw material fluctuations are rare in this business. An increase ofone percent in PVC purchasing costs in 2006 would have reducedprofit before tax by MSEK 0.9. HL Display purchases raw materialson longer terms, often with currency clauses. In order to decreaseraw material price sensitivity, HL Display is successfully developingmethods for use of alternative materials.

Currency riskHL Display’s main markets are within the euro area. Consequentlythe company is exposed to exchange rate fluctuations as productionmainly takes place in Sweden and invoicing in foreign currencies.Invoicing to subsidiaries is carried out in local currency in order toconcentrate the Group’s currency exposure to Sweden. Externaldistributors are invoiced in SEK. The currency effects that impactthe company’s earnings are the transaction flows in the differentcurrencies, flow exposure, and recalculation of the foreign subsidiaries’profit and loss statements and balance sheets, conversion exposure.

Aluminium, steel and wire 8Packaging 5Semi manufactured articles 9Polycarbonate (PC) 10PVC 35Other plastic raw materials 22Tape 7Electricity 4

Raw materials 2006 %

500

600

700

800

900

1,000

1,100

200620052004200320022001

Price of crude PVC EURO/TONNE

Source: ICIS-LOR

Exchange rate EURO/SEK

8.5

9.0

9.5

10.0

200620052004200320022001

Source: The Swedish Central Bank

Flow exposureFlow exposure is caused partly by invoicing in foreign currenciesand partly by purchases in foreign currency or purchases whereprice is regulated by a currency clause. The SEK was strengthenedin 2006 in comparison to inflow currencies, the most important of which are the EUR, GBP, RUB and NOK. 37 percent of turnover is invoiced in EURO, 10 percent in GBP, 7 per cent in RUB and 5percent in NOK. HL Display’s purchases that affect exposure primarilyconsist of overhead expenses for the overseas sales companiesand of material purchases whose prices are regulated through acurrency clause. HL Display’s general policy is to not hedge futurecash flows. HL Display’s export currencies have, as compared to2005, affected operating profit negatively for 2006 by MSEK 1.1according to the table below.

Currency’s affect on operating profit (as compared to average exchange rate in 2005, MSEK)Net sales -0.4Costs goods/services sold 0.8Selling expenses -0.1Administrative expenses 0.0Development expenses 0.0Other operating income/expenses 0.0Exchange rate loss on operative receivables and payables -1.4Total effect of currency exchange rate changes

on operating profit -1.1

Conversion exposureThe net value of assets in currencies (equity in subsidiaries) otherthan the reporting currency (SEK) will change according to exchangerate fluctuations. This risk is termed conversion exposure. For moreinformation please refer to Note 2.

Financial risks and financial policiesFor a description of financial policies and risks please refer to Note 2.


NINE YEAR SUMMARY

Nine year summary

Share turnover velocity %Share turnover during the year/AverageMarket Cap during period * 250/Number of trading days * 100.

Direct yieldDividend as percentage of share priceon 31 December.

Equity per shareReported equity divided by the weightedaverage number of shares.

Equity per share after dilutionReported equity divided by the weightedaverage number of shares after dilution.

Value added per employeeOperating profit plus cost of salariesand social security payments dividedby the average number of employees.

Average collection periodAccounts receivables on 31December divided by net sales increa-sed by 20 per cent VAT (average VATin the Group) multiplied by 365 days.

Capital turnover rateNet sales in relation to average balance sheet total.

Cash flowIn and out flow of liquid funds.

Operational cash flow per shareChanges in cash and cash equivalentsin any given year from operational activities after deduction of interestsand tax payments, plus investmentsin intangible and tangible operationalfixed assets, divided by the weightedaverage number of shares.

P/E ratioShare price on 31 December dividedby earnings per share after tax.

Staff turnoverNo. of employees that have left thecompany divided by average numberof employees.

Return on equity after tax Profit after tax in relation to average equity.

Return on capital employedProfit after financial items plus finan-cial expenses in relation to averagecapital employed. Capital employed is the balance sheet total less non-interest bearing liabilities.

Return on total capitalProfit before taxes plus financialexpenses in relation to average balance sheet total.

Interest-bearing net liabilityInterest-bearing liabilities minusinterest-bearing assets.

Interest coverage ratioProfit before taxes plus financialexpenses in relation to financialexpenses.

Debt/equity ratioInterest bearing liabilities in relationto equity.

Equity/assets ratioEquity including minority share in relation to balance sheet total.

Development expensesDevelopment expenses are expensesfor production, materials and productdevelopment.

Earnings per share after taxProfit after tax, attributable to parentcompany shareholders, divided by theweighted average number of shares.

Earnings per share after dilutionProfit after tax, attributable to parentcompany shareholders, divided by theweighted average number of sharesafter dilution.

Profit marginProfit after before taxes in relation tonet sales.

Income statement (KSEK) 2006 2005 20041) 20032) 20022) 20012) 20002) 19992) 1998Net sales 1,448,138 1,284,824 1,249,029 1,129,005 1,154,407 1,071,934 873,921 768,451 646,646 Operating profit/loss 106,727 62,727 107,753 -3,888 75,967 83,031 47,731 55,401 69,042 Depreciation 44,379 46,798 46,460 47,556 49,231 46,572 40,197 31,255 25,660 Profit/loss before taxes 92,254 61,720 92,837 -9,212 65,353 81,831 44,095 47,125 70,969 Loss from discontinued

operations, net after taxes – -7,709 -15,950 – – – – – – Net profit/loss for the year 61,874 34,745 46,621 -10,109 43,900 55,513 26,747 32,277 44,644

Balance sheet (KSEK) Non-current assets 233,793 241,993 247,637 171,456 193,697 197,742 186,099 168,241 131,584 Current assets 642,768 518,478 519,778 474,088 456,711 436,897 315,701 262,131 253,053 Total assets 876,561 760,471 767,415 645,544 650,408 634,639 501,800 430,372 384,637

Shareholders’ equity 387,756 342,329 328,293 292,979 315,821 283,667 238,919 222,201 199,887 Provisions – – – 13,876 23,478 26,121 16,997 14,051 18,167 Non-current liabilities 129,540 123,083 138,807 66,421 66,444 107,037 84,949 53,461 47,055 Current liabilities 359,265 295,059 300,315 272,268 244,665 217,814 160,935 140,659 119,528 Shareholders’ equity and liabilities 876,561 760,471 767,415 645,544 650,408 634,639 501,800 430,372 384,637

Key ratios Average number of employees 949 933 967 975 925 855 773 706 582 Revenue per employee, KSEK 1,526 1,377 1,292 1,158 1,248 1,254 1,131 1,088 1,111Operating margin, % 7.4 4.9 8.6 -0.3 6.6 7.7 5.5 7.2 10.7Profit margin, % 6.4 4.8 7.4 -0.8 5.7 7.6 5.0 6.1 11.0 Equity/assets ratio, % 44.2 45.0 42.8 45.4 48.6 44.7 47.6 51.6 52.0 Debt/equity ratio 0.52 0.55 0.63 0.49 0.44 0.45 0.42 0.32 0.31 Return on total capital, % 13.0 9.5 14.9 -0.2 12.0 16.0 11.0 12.9 21.9 Return on equity after tax, % 16.6 10.4 15.0 -3.3 14.6 21.2 11.6 15.3 24.5 Return on capital employed, % 17.6 13.5 20.8 -0.3 16.8 23.3 15.5 18.6 32.5 Interest coverage ratio 7.4 6.6 6.5 -0.2 6.6 10.2 7.0 9.3 19.6 Net investments, KSEK 31,662 39,506 64,999 39,344 44,401 47,517 58,099 67,913 63,756 Cash and cash equivalents, KSEK 163,244 81,131 112,013 94,840 100,388 65,201 31,328 22,935 38,701 Development costs, KSEK 39,070 40,378 42,142 36,958 32,897 30,589 26,902 24,581 21,197

1) Includes reclassifications made in conjunction with conversion to IFRS. 2) Years 1997-2003 not restated according to IFRS. Data per share, see page 31.

Definitions

2)


DIRECTORS’ REPORT

Directors’ Report

HL Display AB (publ), corporate registration number 556286-9957, is aSwedish, publicly owned limited company. The company’s registered office is in Stockholm, at Horisontvägen 26, 128 34 Skarpnäck.

Group

GeneralHL Display is a market-leading, international supplier of products and solutionsfor in-store communication and merchandising to the retail sector. HL Displayshall be a growth company with good profitability, thus generating valuegrowth for shareholders

The economyHistorically HL Display has experienced very little vulnerability to changes in theeconomy. A large number of small orders from customers in different marketscreates stable income flows. The transition to selling category solutions bringsgreater sensitivity to conditions in the economy. HL Display is affected negativelyby seasonal variations in December and January, as client companies aremainly retailers who do not plan for any changes in their stores during theChristmas shopping period.

DemandHL Display’s customer structure, with many customers in different markets,means that market risk is well spread. HL Display produces and delivers directlyin response to customer orders. Changeover time in production is short, and thecompany has very short lead times, mostly less than two weeks. HistoricallyHL Display has experienced a very low level of bad debt. The company’scustomers are large, well-established companies that are financially sound.The biggest single customer accounts for five percent of the turnover. HL Display’sdevelopment towards a larger proportion of customer-specific total solutionswill create bigger and bigger orders, consequently an increasing degree offluctuation in income flows is anticipated.

CompetitionHL Display encounters global competition at product level, with a few interna-tional suppliers able to provide individual products to several markets. In thefield of merchandising and in-store communication the company encounterscompetition at local level, i.e. in a country or a region. HL Display currently hasno direct competitor being a global supplier of total solutions. Retail companiesneed uniform, common solutions across several markets which means thatthe risk for HL Display is low in mature markets and among large client compa-nies. As HL Display follows its established companies into new markets, it isjudged that the risk is also relatively low on new markets.

Manufacturing, products and patentsHL Display is a world leader in the company’s most important productionmethods. Forward-thinking and innovative design have contributed to HL Displaysetting new standards in many parts of the retail sector. It is consequentlyquite natural that several instances of the company’s products being copiedhave been reported.

Political riskPolitical risks include legislation, taxation matters and trade policy factors. HL Display is not exposed to any significant political risk.

EmployeesHL Display has a large number of key employees with a high level of expertiseand well-developed customer relations. As the expertise within the companyis transferred further out in the organisation, closer to the customer, it isbecoming increasingly important to document customer activities in databases.

Major projects are processed in a customer project module. Activities withdifferent customers takes place in teams so the financial effect of the loss of any key employee is limited.

Ownership situationHL Display shares have been listed on the OMX Nordic Exchange’s Small Caplist since 1993. As of 31 December 2006 the number of shareholders was1,942 (2,128). The proportion of institutional shareholders is estimated at56 (55) percent of capital and the proportion of foreign shareholders at 2 (1)percent. The largest shareholder is the Remius family with 31.1 percent ofcapital followed by Ratos AB with 28.8 percent.

Comments on the company’s results, financial status and cash flowConsolidated income statementsThe Group’s net sales totalled MSEK 1,448 (1,285) during the year reflectinggrowth of 13 percent as compared to 2005. The change in the value of SEKcompared to export currencies exerted a negative effect on revenues to theorder of MSEK 0.4, compared to last year. Operating profit was MSEK 107(63) and profit before taxes was MSEK 92 (62). Profits have been affected byone-off costs amounting to MSEK 15 which concern transfers to restructuringreserves, primarily covering costs for premises and personnel in connectionwith the closure of the regional service centre in Holland and the restruc-turing of the German sales company. Changes in the value of SEK comparedto export currencies have, in comparison to the previous year, exerted anegative affect on the operating profit of MSEK 1.1. The period’s net interestexpenses amounted to MSEK -9 (-10) while translation differences and othercurrency effects reported in the financial net amounted to MSEK -5 (9). HL Display’s most important export currencies are EUR and GBP.

Consolidated balance sheetsThe balance sheet total increased by MSEK 116 or 15 percent. Operating capitaldecreased by MSEK 28 and liquidity has improved. Fixed assets fell by MSEK8 as a result of investments being less than depreciation for the year.

The capital turnover rate increased to 1.8 (1.7) times. During the period, netinvestments in fixed assets totalled MSEK 32 (40) and were mainly connectedto production equipment. Planned depreciation during the period was MSEK44 (47). Stocks increased by MSEK 3 as of 31 December, and constitute 9(10) percent of net turnover. Accounts receivable had increased by MSEK 23as of 31 December. In relation to net turnover, accounts receivable decreasedto 19 (20) percent. The average credit period decreased to 54 (60) days.

EquityAs of 31 December 2006, HL Display’s equity totalled MSEK 388 (342). Equityper share was SEK 50.10 (44.52). The equity/assets ratio was 44 (45) percent.Long-term liabilities increased by MSEK 6 to MSEK 130. Short-term liabilitiesincreased by MSEK 64. The debt-equity ratio fell to 0.52 (0.55) times. As of31 December, interest bearing liabilities amounted to MSEK 202 (189), ofwhich short-term liabilities accounted for MSEK 102 (81).

Changes to equity primarily consist of the profit for the year and this year’sdividend to shareholders. In 2006 SEK 3.00 per share was distributed, i.e.MSEK 23.1. During the year 38,300 new ordinary shares were issued as aresult of the options programmes previously undertaken by the company.Existing options programmes may cause changes in equity during the period2007-2011 when these options may be converted into shares (please referto page 58).

Cash flowThe cash flow statement was drawn up using the indirect method. The cashflow reported includes only transactions that involved payments received ormade. Cash flow from current operations improved to MSEK 120 (43), mainly


DIRECTORS’ REPORT

due to improved operating profit. Working capital increased and exerted anegative effect on cash flow to the order of MSEK 17. Cash flow from invest-ment activities improved due to reduced investments of MSEK -33 (-42);investments are less than the year’s planned depreciation. Investments relate mainly to tangible fixed assets, such as production equipment includingtools for new products. Cash flow from financing activities totalled MSEK -4 (-37). Dividends were paid to the order of MSEK 23 (19), and loans wereraised to the amount of MSEK 14.

Events of significant importance that occurred during the financial year orafter the balance sheet dateIn 2006 HL Display showed good levels of sales growth on most of its markets.Growth markets in Eastern Europe and Asia have developed especially well.However, growth did not occur in the UK sales company as a result of organi-sational changes. The sales company in France registered unchanged salesvolumes for 2006. This growth, combined with streamlining measuresundertaken, has begun to have the desired effect which means that operatingprofit increased from MSEK 63 to MSEK 107. Exclusive of one-off costs ofMSEK 15, the profit margin would have increased to 7.4 (4.8) percent.

In 2006, HL Display’s factory in Suzhou, China started up. Developmentshave been positive and the factory has also begun to deliver to the Europeanmarket. A decision has been taken to continue the expansion of operations atthis location. This factory is expected to be responsible for a little more than5 percent of the Group’s production in 2007.

Raw material prices have been at a historically high level in 2006. TheGroup’s most important raw material – PVC – noted its highest price levelever. This has partially counteracted the positive profit affects of previouslyimplemented production streamlining measures.

During January 2007 the Finnish company Display Team Oy was acquired.The company manufactures and markets shelf merchandising solutions. Forthe financial year ended February 2006, Display Team's net sales amountedto MSEK 50 and the operating profit amounted to MSEK 4.5. For the financialyear ending February 2007 a net sales growth exceeding 10 percent is expected. The acquisition is expected to have a marginal positive effect on earnings per share for the HL Display Group 2007.

Organisational changesDuring the year a new sales company has been set up in India, bringing thetotal number of such companies in the Group to 30.

Personnel

Average number of employees 2006 2005Total 949 933Sweden 427 478Abroad 522 455Women 351 337Men 598 596

The average number of employees in HL Display increased by 16 people in2006. The number of employees at year-end was 947 (914). The proportionof employees in Sweden was 45 (51) percent.

Research and developmentProduct development is an important element of HL Display’s growth strategy.One measure to secure future growth has been to increase focus on generaldevelopment. In 2006 this focus resulted in an increase in the number ofinnovations launched. Development costs in 2006 totalled MSEK 39 (40).

Information about risks and uncertain factorsFor a description of significant risks and uncertain factors that HL Displayfaces, please refer to the Risk and sensitivity analysis on page 32.

Financial risks and risk managementFor a description of the finance policy, financial instruments and risk manage-ment utilised within HL Display, please refer to Note 2.

Environmental informationIntensive environmental activities have been under way for several years at

all production facilities, please refer to Page 20. The powder coating plant inFalkenberg and the screen-printing plant in Falun must be registered underSwedish environmental laws. HL Display does not run any operations thatrequire permits.

Report on the Board’s work during the yearFor a report on the work of the Board and committees, please refer to Page 62-63.

Expectations with regard to future developmentsBusiness objectivesHL Display’s overall objective is to be a leading growth company with goodprofitability and increased shareholder value. Profitability must be prioritised.The financial objective is a profit margin of 10 percent.

Outlook for 2007Profitability will continue to be first priority as it has been for the last fewyears. A profit margin of ten percent is within reach.

HL Display’s largest markets are in the Nordic countries and WesternEurope. They are characterised by limited growth and stiff competition.Consequently the market investments of the last few years have been aimedat Eastern Europe and Asia. Pace of growth is rapid on these markets. Thesame rate of sales growth as in 2006 is not expected for 2007.

HL Display will actively examine opportunities to strengthen the company’sproduct range and market position through acquisitions.

A more detailed forecast for the entire year will be submitted in connectionwith the Q3 quarterly report

The parent companyThe parent company has its registered office in Stockholm. Its activities includeGroup services and Group management functions. The parent company’sprofit after financial items was MSEK 86 (75).

Remuneration of senior executivesFor information regarding remuneration of individuals in senior managementpositions, please refer to Note 31.

Option programmeDuring the year a new options programme has been established encompassing75,000 employee stock options intended for the CEO. If this option is fullyrealised then the new shares will amount to 1.0 percent of total share capital.A previous programme is still underway in which 10,900 warrants have notbeen utilised. If this programme is fully utilised the new shares will be theequivalent of 0.1 percent of total share capital. For more information, pleaserefer to pages 30-31.

For more information about the parent company, see note 41.

Proposed distribution of the company’s profit or lossThe Board of Directors and the CEO propose that the profit available, SEK238,029,535 be distributed as follows:

Dividend, 7,727,172 shares * SEK 3.50 SEK 27,045,102 Retained earnings carried forward SEK 210,984,433 Total SEK 238,029,535

The Board's motivation of the proposed dividend will be posted on the company's website and distributed at the Annual General Meeting.

For information on the company’s results and financial status in generalplease refer to the following Income Statement and Balance Sheet with associated disclosures.


CONSOLIDATED FINANCIAL STATEMENTS

The Group

Consolidated income statements

KSEK, 1 January–31 December Note 2006 2005Net Sales 3, 4 1,448,138 1,284,824Cost of goods/services sold -779,736 -695,174Gross profit 668,402 589,650

Selling expenses -386,384 -364,014Administrative expenses -135,604 -122,200Research and development expenses -39,070 -40,378Other operating income 6 4,659 4,574Other operating expenses 7 -5,276 -4,905Operating profit 8, 9, 10 106,727 62,727

Financial income 2,426 10,954Financial expenses -16,899 -11,961Net financial items 11 -14,473 -1,007

Profit before taxes 92,254 61,720

Income tax expense 13 -30,380 -19,266Profit after taxes but before loss from discontinued operations 61,874 42,454

Profit/loss from discontinued operations, net after tax 5 – -7,709Net profit for the year 61,874 34,745

Attributable to:The parent company’s shareholders 60,524 35,289Minority interest 1,350 -544

61,874 34,745

Earnings per share 14before dilution (SEK) 7.87 4.59after dilution (SEK) 7.85 4.58

Earnings per share from remaining businesses 14before dilution (SEK) 7.87 5.59after dilution (SEK) 7.85 5.58



Consolidated balance sheets

KSEK, December 31 Note 2006 2005AssetsNon-current assets 4, 15, 16Intangible assets 17 5,570 2,844Property, plant and equipment 18 208,494 223,937Deferred tax assets 13 17,923 13,749Other non-current receivables 21 1,806 1,463Total non-current assets 233,793 241,993

Current assetsInventories 23 136,403 132,984Tax assets 8,275 9,825Trade and other receivables 24 276,456 253,021Prepaid expenses and accrued income 25 24,760 22,385Other current assets 26 33,630 19,132Cash and cash equivalents 27 163,244 81,131Total current assets 642,768 518,478Total assets 876,561 760,471

Equity and liabilitiesEquity 28Share capital 38,637 38,444Reserves – -1,487Retained earnings including profit/loss for the year 349,119 305,372Total equity 387,756 342,329

Non-current liabilitiesLong-term interest-bearing liabilities 2, 30 100,449 107,899Other non-current liabilities 1,328 656Pension provisions 31 2,732 2,308Other provisions 32 6,558 –Deferred tax liabilities 13 18,473 12,220Total non-current liabilities 129,540 123,083

Current liabilitiesShort-term interest-bearing liabilities 2, 30 101,584 80,801Trade and other payables 91,112 78,659Tax liabilities 12,099 4,480Other current liabilities 48,818 36,363Accrued expenses and prepaid income 34 105,652 94,756Total current liabilities 359,265 295,059Total liabilities 488,805 418,142Total equity and liabilities 876,561 760,471

For information about assets pledged as collateral and contingent liabilities, see note 35.



Consolidated statement of changes in equity

Equity relating to the parent company’s shareholdersRetained Minority Total

KSEK, Year ending Dec. 31, 2005 Note 28 Share capital Reserves earnings Total interest equityOpening balance 38,444 – 289,752 328,196 97 328,293Cash flow hedge reserve – -1,487 – -1,487 – -1,487Total changes posted directly to equity – -1,487 – -1,487 – -1,487Profit for the year – – 35,289 35,289 -544 34,745Total changes in equity, excl.

distributions to shareholders – -1,487 35,289 33,802 -544 33,258Dividend – – -19,222 -19,222 – -19,222Closing balance 38,444 -1,487 305,819 342,776 -447 342,329

Equity relating to the parent company’s shareholdersRetained Minority Total

KSEK, Year ending Dec. 31, 2006 Share capital Reserves earnings Total interest equityOpening balance 38,444 -1,487 305,819 342,776 -447 342,329Cash flow hedge reserve – 1,487 – 1,487 – 1,487Equity-settled share-based

instruments (IFRS 2) – – 460 460 – 460Total changes posted directly to equity – 1,487 460 1,947 – 1,947Profit for the year – – 60,524 60,524 1,350 61,874Total changes in equity, excl.

distributions to shareholders – 1,487 60,984 62,471 1,350 63,821Dividend – – -23,066 -23,066 – -23,066New share issues 192 – 3,102 3,294 1,378 4,672Closing balance 38,636 – 346,839 385,475 2,281 387,756

Consolidated cash flow statements

KSEK, 1 January – 31 December Note 36 2006 2005Operating activitiesOperating profit from remaining businesses 106,727 62,727Operating profit from discontinued operations – -9,353Operating profit/loss 106,727 53,374Depreciation 44,379 46,797Other items not affecting cash flow 15,072 4,041Interest received 2,423 1,456Interest paid -12,002 -11,945Income tax paid -19,132 -22,590Cash flow from operating activities before changes in working capital 137,467 71,133

Cash flow from changes in working capitalIncrease (-)/Decrease (+) in inventories -3,419 -17,111Increase (-)/Decrease (+) in operating assets -40,305 -11,478Increase (-)/Decrease (+) in operating liabilities 27,080 899Net cash flow from operating activities 120,248 43,443

Investing activitiesInvestments in property, plant and machinery -27,880 -39,827Investments in intangible assets -4,361 -1,452Investments in financial assets -343 -485Net cash flow from investing activities -32,584 -41,764

Financing activitiesNew share issue 4,672 –Borrowing 29,775 6,376Repayment of debt -8,654 -16,697Repayment of leasing debt -6,807 -7,679Dividend paid to parent company’s shareholders -23,066 -19,222Net cash flow from financing activities -4,080 -37,222

Net cash flow for the year 84,159 -35,543Cash and cash equivalents at beginning of the year 81,131 112,013Foreign exchange differences -2,046 4,661Cash and cash equivalents at end of the year 163,244 81,131


THE PARENT COMPANY

The Parent Company

Parent company’s income statements

KSEK, 1 January–31 December Note 2006 2005Net Sales 3, 4 84,624 88,942Cost of services sold -82,489 -85,982Gross profit/loss 2,135 2,960

Selling expenses -1,226 -1,671Administrative expenses -18,618 -17,939Research and development expenses -14,148 -13,066Other operating income 6 2,631 3,001Operating loss 8, 9 -29,226 -26,715

Financial income and expenses:Income from participations in Group companies 111,571 96,297Income from other securities and receivables that are non-current assets 4,615 5,422Other interest income and financial income 685 666Interest and other financial expenses -1,167 -383Profit before appropriations and taxes 11 86,478 75,287

Appropriations 12 -11,874 2,003Profit before taxes 74,604 77,290

Income tax expense 13 -13,054 -9,503Net profit for the year 61,550 67,787


THE PARENT COMPANY

Parent company’s balance sheets

KSEK, December 31 Notes 2006 2005Assets

Non-current assetsIntangible assets 17 4,935 1,486Property, plant and equipment 18 589 481Financial investments

Participations in Group companies 19 52,261 58,418Participations in associated companies and joint ventures 20 17,147 16,751Deferred tax assets – 837Other non-current receivables 21 644 644

Total financial investments 70,052 76,650Total non-current assets 75,576 78,617

Current assetsCurrent receivables

Receivables from Group companies 22 244,848 241,993Prepaid expenses and accrued income 25 9,090 10,506Other current assets 26 9,278 7,454

Total current assets 263,216 259,953

Cash and cash equivalents 76,609 37,169Total current assets 339,825 297,122Total assets 415,401 375,739

Equity and liabilitiesEquity 28Restricted equityShare capital (913,024 shares class A and 6,814,148 shares class B) 38,636 38,444

Statutory reserve 8,010 8,010

Unrestricted equityRetained earnings 176,479 134,433Net profit for the year 61,550 67,787

Total equity 284,675 248,674

Untaxed reserves 29 29,904 18,030

Current liabilitiesTrade and other payables 17,861 6,016Liabilities to Group and associated companies, joint ventures 33 50,981 91,594Tax liabilities 5,925 –Other current liabilities 14,089 1,439Accrued expenses and prepaid income 34 11,966 9,986

Total current liabilities 100,822 109,035Total equity and liabilities 415,401 375,739

Assets pledged and contingent liabilities for the parent companyKSEK, as at 31 December Note 2006 2005Assets pledged 35 40,674 49,826Contingent liabilities 35 163,633 115,330


THE PARENT COMPANY

Statement of changes in the parent company’s equity

Restricted equity Unrestricted equityShare Statutory Retained Profit/loss Total

KSEK, Year ending Dec. 31, 2005 Note 28 capital reserve earnings for the year equity Opening balance 38,444 8,010 178,437 – 224,891Group contributions paid – – -24,782 – -24,782Total changes posted directly to equity – – -24,782 – -24,782 Profit for the year – – – 67,787 67,787Total changes in equity, excl. distributions to shareholders – – -24,782 67,787 43,005Dividend – – -19,222 – -19,222Closing balance 38,444 8,010 134,433 67,787 248,674

Restricted equity Unrestricted equityShare Statutory Retained Profit/loss Total

KSEK, Year ending Dec. 31, 2006 capital reserve earnings for the year equity Opening balance 38,444 8,010 202,220 – 248,674Group contributions paid – – -6,237 – -6,237Equity-settled share-based instruments (IFRS 2) – – 460 – 460Total changes posted directly to equity – – -5,777 – -5,777 Profit for the year – – – 61,550 61,550Total changes in equity, excl. distributions to shareholders – – -5,777 61,550 55,773New share issue 192 – 3,102 – 3,294Dividend – – -23,066 – -23,066Closing balance 38,636 8,010 176,479 61,550 284,675

Parent company’s cash flow statements

KSEK, 1 January-31 December Note 36 2006 2005Operating activitiesOperating loss -29,226 -26,715Depreciation 1,072 1,025Other items not affecting cash flow 1,044 –Interest received 5,356 6,208Dividends received 41,356 46,601Interest paid -1,167 -383Income tax paid -61 1,742Cash flows from operating activities before change in working capital 18,374 28,478

Cash flow from changes in working capitalIncrease (-)/Decrease (+) in operating assets -6,552 -85,190Increase (+)/Decrease (-) in operating liabilities -14,723 50,218Net cash flow from operating activities -2,901 -6,494

Investing activitiesInvestments in property, plant and equipment -331 -231Investments in intangible assets -4,298 -1,093Investments in subsidiaries -5,083 -7,470Investments in associated companies -396 –Net cash flow from investing activities -10,108 -8,794

Financing activitiesNew share issue 3,294 –Dividend paid -23,066 -19,222Group contributions received 80,883 49,696Group contributions paid -8,662 -34,419Net cash flow from financing activities 52,449 -3,945

Net cash flow for the year 39,440 -19,233Cash and cash equivalents at beginning of the year 37,169 56,402Cash and cash equivalents at end of the year 76,609 37,169


NOTES

Notes

Note 1 Accounting principles

Compliance with standards and lawsThe consolidated financial statements have been produced in accordance withthe International Financial Reporting Standards (IFRS) issued by the InternationalAccounting Standards Board (IASB) and interpretations announced by theInternational Financial Reporting Interpretations Committee (IFRIC), which havebeen approved by the EC Commission for application within the EU. Further-more the Swedish Financial Accounting Standards Council’s recommendationRR 30:05, Supplementary accounting rules for groups, have been applied.

The parent company applies the same accounting principles as the Groupexpect in the cases specified below in the section entitled “The parent company’saccounting principles”. The variances that exist between the parent company’sand the Group’s principles are caused by limitations in the ability to applyIFRS in the parent company as a consequence of the Swedish Annual AccountsAct and the Swedish Act on Safeguarding Pension Commitments, and in somecases for tax reasons.

The annual accounts and consolidated financial statements were approvedfor publication by the Board on 2 February 2007. The consolidated incomestatement and balance sheet, and the parent company’s income statementand balance sheet will be presented for adoption at the Annual meeting ofshareholders on 14 March 2007.

Conditions for drawing up the parent company’s and the Group’s financialstatementsThe parent company’s functional currency is Swedish kronor. This means thatthe financial statements are presented in the reporting currency (Swedishkronor) rounded to the nearest thousand. Assets and liabilities are reportedat historical cost, except certain financial assets and liabilities, which arereported at their fair value.

Non-current assets are reported at the lower of the previously reportedvalue and the fair value after the deduction of sales costs.

Producing the financial statements in accordance with IFRS requires companymanagement to perform evaluations and estimates, and to make assumptionsthat affect the application of the accounting principles and reported amountsfor assets, liabilities, income and expenses. The estimates and assumptionsare based on historical experience and a number of other factors that areconsidered reasonable in the prevailing circumstances. The actual result may deviate from these estimates and evaluations.

The estimates and assumptions are reviewed regularly. Changes from estimates are reported in the period when the change is made and, whereapplicable, in future periods.

Critical estimates and evaluations by company management in the applicationof IFRS are described in greater detail in note 40. The accounting principlesdescribed below for the Group have been applied consistently to all periodspresented in the Group’s financial statements, unless specified otherwisebelow. The Group’s accounting principles have been applied consistently whenconsolidating the parent company, subsidiaries, associated companies andjoint ventures.

Segment reportingA segment is a part of the Group that is identifiable in accounting terms andthat either supplies products or services (lines of business), or products orservices within a specific economic environment (geographical area), which areexposed to risks and opportunities that are different from other segments. Inaccordance with IAS 14, segment information is only reported for the Group.

HL Display is a distinct niche company with production and sales of ahomogenous product range. The products have varying functions, but aredesigned for the same areas of application (in-store communication andmerchandising). The company’s opportunities and risks are on a global

market, where the crucial factor for success is to be a supplier to the leadingmultinational and national retail chains and brand manufacturers (the company’skey accounts). HL Display achieves this by means of global key account manage-ment, by being a leader in cost-efficient production, logistics and sales, by beinginnovative in product development and design, and by offering a broad range ofproducts. HL Display is therefore active solely within one line of business, whichis why the primary segment for reporting is the same as reporting for the companyas a whole. The geographical regions are reported as secondary segments,see note 4. These divisions correspond with the company’s internal reporting.

ClassificationNon-current assets and non-current liabilities essentially consist of amountsthat are expected to be recovered or paid after more than twelve months fromthe balance sheet date. Current assets and current liabilities essentiallyconsist of amounts that are expected to be recovered or paid within twelvemonths from the balance sheet date.

Consolidation principlesSubsidariesSubsidiaries are companies that are subject to a deciding influence from HL Display AB. A deciding influence means directly or indirectly a right to definea company’s financial and operational strategies with the aim of achievingfinancial benefits. When assessing whether there is a deciding influence,consideration is given to shares that potentially provide entitlement to voteand that can be used or converted without delay.

Subsidiaries are consolidated using the purchase method. This methodmeans that the acquisition of a subsidiary is treated as a transaction inwhich the Group indirectly acquires the subsidiary’s assets and takes on itsliabilities. The Group acquisition cost is defined by means of an acquisitionanalysis in connection with the business acquisition. The analysis defines the acquisition cost and the fair value of acquired, identifiable assets anddebts and contingent liabilities taken on. A positive difference constitutesGroup goodwill. A negative difference is reported directly in net income.

Subsidiaries’ are consolidated from the date when deciding influencestarts until the date it ceases.

Associated companies and joint venturesAssociated companies are companies that are not subsidiaries, but where HL Display AB holds, either directly or indirectly, more than 20 per cent of thevotes or by some other means has a significant influence on operational andfinancial control. Participations in associated companies are reported in theconsolidated financial statements according to the equity method. Joint ventureswhere HL Display controls more than 50 percent of the number of votes andholds a deciding influence are consolidated as subsidiaries. Joint ventureswhere HL Display through partnership agreements with one or more parties,holds a joint, deciding influence over operational and financial control, areconsolidated using the proportionate method. The proportionate method meansthat HL Display’s share of the joint venture companies’ income, expenses,assets and liabilities, is reported on an item by item basis.

Transactions that are eliminated during consolidationInternal Group receivables, payables, income and expenses and unrealisedprofits/losses arising from transactions between Group companies are elimi-nated in full when the consolidated financial statements are prepared.

Unrealised profits resulting from transactions with associated companiesand jointly controlled companies are eliminated to the extent that they corre-spond to the Group’s shareholding in the company. Unrealised losses areeliminated in the same way as unrealised profits, but only to the extent thatthere is no indication of any impairment losses.


NOTES

Foreign currencyTransactions in foreign currencyTransactions in foreign currencies are converted to the functional currency at the exchange rate prevailing on the transaction date. Monetary assets andliabilities in foreign currencies are converted to the functional currency at theexchange rate prevailing at the year-end. Exchange rate differences that arisefrom these conversions are reported in the income statement. Non-monetaryassets and liabilities that are reported at the historical cost are converted atthe exchange rate on the transaction date.

Translation of foreign currency financial statementsCompared to the case in most other group’s, all HL Display’s subsidiaries areconsidered to have the same functional currency as the parent company sincethey are all very closely linked to the parent company. However, ongoingreporting in the foreign units may not be performed in the functional currencydue to legislation in each country. There is therefore a translation of eachsubsidiary’s financial statements into the functional currency (SEK) by meansof translating monetary assets and liabilities in foreign currency into thereporting currency at the exchange rate prevailing at the year-end.

Income and expenses excluding depreciation in a foreign business aretranslated into Swedish kronor at an average exchange rate representing anapproximation of the exchange rates on each transaction date. Depreciationcharges are translated at the exchange rate on the acquisition date for eachasset. The cost of goods sold is converted at the average exchange rate, asthe turnover rate is high. The translation difference arising when convertingcurrencies of foreign businesses appears in the income statement underfinancial items.

RevenueThe Group’s revenue consists almost exclusively of sales of goods. Incomefrom the sale of goods is reported in the income statement when significantrisks and benefits relating to the ownership of the goods have been transferredto the buyer. Income from service assignments are reported in the incomestatement based on the degree of completion at the year-end. The degree ofcompletion is determined by means of an evaluation of delivered share of thetotal order. Income is not reported if it is not probable that the financial bene-fits will accrue to the Group. Sales are reported net after VAT and discounts.

Operating expenses and financial income and expensesOperational leasesCosts in respect of operational leases are reported in the income statementon a linear basis over the leasing term. Benefits received in connection withthe signing of an agreement are reported in the income statement on a linearbasis over the leasing term.

Financial leasesThe minimum charges are divided between interest expense and repaymentof debt. The interest expense is reported over the leasing period so that eachaccounting period is charged with an amount corresponding to a fixedinterest rate for the debt reported during each period. Variable charges arereported as expenses in the periods in which they occur.

Financial income and expensesFinancial income and expenses consist of interest income from bank funds,receivables and interest-bearing securities, interest expenses of loans, dividendincome, exchange rate differences, unrealised and realised profits fromfinancial investments and derivatives. Interest income from receivables andinterest expenses from debts are calculated using the effective interestmethod. The effective interest is the interest that means that the currentvalue of all future payments received and made during the fixed-rate interest

term are equal to the reported value of the receivables or debt. Dividend income is reported when the right to receive payment is confirmed.

The Group do not capitalise interest on the purchase value of assets aswould be possible in some cases according to IAS 23.

Income tax expensesIncome tax expenses comprise both current and deferred tax expenses.Income tax expenses are reported in the income statement, except when anunderlying transaction is reported directly to equity, in which case the taxeffect is also taken to equity.

Current tax is tax that must be paid or received in respect of the currentyear, applying the tax rates that have been adopted or effectively adopted asat the year-end, including adjustment of current tax relating to previous periods.

Deferred tax is calculated on the basis of temporary differences betweenreported and tax values of assets and liabilities. The following temporarydifferences are not taken into account: for a temporary difference that hasoccurred on goodwill, first reporting of assets and liabilities other than acqui-sitions where the transaction do not effect either the reported, or the taxableprofit/loss, nor is consideration given to temporary differences relating toparticipations in subsidiaries and associated companies. The valuation ofdeferred tax is based on how reported values of assets or liabilities areexpected to be realised or regulated. Deferred tax is calculated by applyingthe tax rates and tax rules that have been adopted or effectively adopted asat the year-end.

Deferred tax assets relating to deductible temporary differences and taxloss carryforwards are only reported to the extent it is probable that it will bepossible to utilise these. The value of deferred tax assets is reduced when itis no longer considered probable that they can be utilised.

Any additional income tax that arises from a dividend is reported at thesame time as the dividend is reported as a liability.

Financial instrumentsFinancial instruments that are not derivatives are valued and reported in theGroup in accordance with IAS 39.

Financial instruments reported in the balance sheet include on the assetsside cash and cash equivalents, loans receivables, trade receivables andderivatives. Liabilities include trade payables, loan debts and derivatives.

Reporting in and removal from the balance sheetA financial asset or financial liability is reported to the balance sheet whenthe company becomes a party to the contractual terms of the instrument.Trade receivables are included in the balance sheet when an invoice hasbeen issued. Liabilities are included when the counterparty has delivered andthere is a contractual obligation to pay, even if an invoice has not yet beenreceived. Trade payables are included when an invoice has been received.

A financial asset is removed from the balance sheet when the rights in theagreement have been realised, fall due, or the company loses control overthem. The same applies for a part of a financial asset. A financial liability isremoved from the balance sheet when the obligation in the agreement ishonoured or redeemed in any other way. The same applies for a part of afinancial liability.

A financial asset and a financial liability are offset and the net amount isreported in the balance sheet only if there is a legal right to offset thisamount, plus that the intention is to regulate the items at the same time orwith a net amount.

The acquisition or divestment of financial assets is reported on the transactiondate, which is the date when the company undertakes to acquire or disposeof the asset.

››


NOTES

Cash and cash equivalentsCash and cash equivalents consist of cash and immediately available creditbalances in banks and corresponding institutes, as well as short maturityinvestments with a duration from the acquisition date of less than threemonths that are only exposed to an insignificant risk of value fluctuations.

Classification and valuationOn each reporting occasion the company assesses whether there are objectiveindications that a financial asset or group of financial assets are impaired.For equity instruments classified as available-for-sale, a considerable, longdrawn out decrease in their fair value is anticipated, to less than the instru-ment’s acquisition cost, before impairment is carried out. If impairment is necessary for an asset belonging to the category assets that may be sold,any previous accumulated decrease in value reported directly against equitywill be transferred to the income statement.

Financial instruments that are not derivatives are initially reported usingthe acquisition cost the equivalent of the instrument’s fair value with an addition for transaction costs for all financial instruments, except the categorythat is reported at its fair value via the income statement. These are reportedexclusive of transaction costs. A financial instrument is classified at acquisitionpoint depending on the intention of the acquisition. Classification determineshow the financial instrument is valued after the first accounting occasionwhich is described below.

Financial assets and debts are valued at their fair value via the income statementThis category consists of two sub-groups: financial assets/liabilities maintainedfor trading and other financial assets/liabilities that the company has initiallychosen to place in this category (according to the Fair Value Option). The Grouphas not identified any financial assets as an item valued at fair value via theincome statement, either held for trade or according to the Fair Value Option.

Loans receivables and trade receivablesLoans receivables and trade receivables are financial assets that do notconstitute derivatives with fixed payments or with payments that can be defined, and that are not quoted on an active market. Assets in this categoryare valued at the accrued acquisition cost. The accrued acquisition cost isdetermined on the basis of the effective interest rate that was calculated onthe acquisition date. Trade receivables are reported at the amount that isexpected to be received after deductions for impairment losses.

Investments held until maturityInvestments held until maturity are financial assets that have payments thatare fixed, or that can be defined in advance, with a fixed term, and that thecompany has an explicit intention and ability to hold until maturity. Assets inthis category are valued at the accrued acquisition cost.

Financial assets that can be soldHL Display did not have any assets in this category in 2006.

Other financial liabilitiesLoans and other financial liabilities, for example trade payables belong to thiscategory. Other financial liabilities are valued at the accrued acquisition cost.

Derivatives and hedge accountingDerivative instruments consist of items such as forward contracts, options andswaps. Derivatives also include so called embedded derivatives, contractualterms that are embedded into other agreements. HL Display had no embeddedderivatives in 2006. Derivatives reported initially at fair value, consequentlytransaction costs are debited to the period’s income. Then the derivativeinstruments are valued at fair value and value changes reported in the followingmanner. To satisfy the requirements for hedge accounting in accordance withIAS 39, there must be an unambiguous link to the hedged item. It is also a

requirement that the hedge provides effective protection for the hedged item,that hedging documentation has been drawn up and that the effectivenesscan be measured. Profit and losses in respect of hedges are reported in theincome statement on the same date as profit and losses are reported for theitems hedged. In the event that the conditions for hedge accounting are nolonger satisfied, the derivative instrument is reported at its fair value with thevalue change in the income statement.

Hedging of net monetary assets and receivables and liabilities in foreign currencyHL Display has hedged most of the subsidiaries’ net monetary assets in foreigncurrency through the arrangement of currency loans or forward contracts. Hedgeaccounting is not applied as financial hedging is reflected in the accountingas both the underlying receivable or debt and the hedge instrument are reportedat closing date currency exchange rate. The exchange rate effects of hedginginstruments are offset against the translation difference arising when conver-ting foreign subsidiaries’ income statements and balance sheets and againstexchange rate differences in the parent company’s loan portfolio. Value changesconcerning receivables related to operations and liabilities are reported inthe operating profit/loss while value changes concerning financial receivablesplus translation differences are reported in net financial items.

Transaction exposure – cash flow hedgingCurrency exposure concerning future forecasted or contracted flows can behedged using currency futures. When held, currency futures are reported at fairvalue in the balance sheet. Value changes are taken directly to equity in ahedge reserve until the hedged flow is reported in the income statement, at which point the cumulative value changes of the future hits the incomestatement, were they meet and match the income statement effects of thehedged transaction.

Property, plant and equipmentAssets ownedProperty, plant and equipment are reported as an asset in the balance sheetif it is probable that future financial benefits will accrue to the company andthe acquisition cost of the asset can be calculated in a reliable way. HL Displayvaluates property, plant and equipment according to the purchase method.

Property, plant and equipment are reported in the Group at the acquisitioncost after deductions for cumulative depreciation and possible impairmentlosses. The acquisition cost includes the purchase price and costs directlyattributable to put the asset in place and in a fit state to be used.

The acquisition cost of fixed assets manufactured in-house includes expensesfor material, for remuneration of employees plus other manufacturing overheadsthat may be considered to be attributable to this particular asset.

The reported value of property, plant and equipment is removed from thebalance sheet when it is disposed or sold off, or when no future financialbenefits are expected from use or disposal/sale of the asset. Any profit/lossarising from the disposal or retirement of an asset comprises the differencebetween the sale price and the asset’s reported value with a deduction for directsales costs. Such profit/loss is reported as other operating income/expense.

Leased assetsIAS 17 is applied for leased assets. Leasing is classified in the consolidatedfinancial statements as either financial or operational leasing. Financial leasingmeans that the financial risks and benefits associated with ownership areessentially transferred to the lessee; if not, it is a case of operational leasing.

Assets that are hired under financial lease agreements have been reportedas assets in the consolidated balance sheet. The obligation to pay futureleasing charges has been reported as non-current and current liabilities. Theleased assets are depreciated according to plan, while lease payments arereported as interest and repayment of debts. Operational leasing means thatthe leasing charge is reported as an expense on a linear basis over the termof the agreement, based on utilisation.

››


NOTES

Additional expensesAdditional expenses are added to the acquisition cost if it is probable thatfuture financial benefits associated with the asset will accrue to the companyand the acquisition cost can be calculated reliably. Other additional expensesare reported as a cost in the period when they are incurred.

If the expense relates to the replacement of identified components, orparts thereof, or if a new component has been added, the expense is addedto the acquisition cost. Any non-depreciated, reported values of replacedcomponents are retired and reported as expenses. Repair expenditures areexpensed as they occur.

Deprecation principlesDepreciation takes place over the asset’s estimated useful life. There is nodepreciation of land. Leased assets are also written off over their estimatedlifetime, or if shorter, over the agreed leasing period. The Group appliescomponent depreciation. For property, plant and equipment that consist ofparts with different utilisation periods, are the estimated useful lives thebasis for depreciation.

Estimated useful lives:– internal and external surface of business properties 27 -40 years– fixed installations, business properties 12 -50 years– plant and machinery 5 -12 years– equipment, tools, fixtures and fittings 3 -7 years– rebuilding of other party’s property 20 years

There is an annual review of depreciation methods and of each asset’s residualvalue and useful life.

Intangible assetsGoodwillGoodwill represents the difference between the acquisition cost for the businessacquisition and the fair value of acquired identifiable assets, assumed debtsand contingent liabilities.

Computer systemsComputer systems acquired by the Group are reported at acquisition cost minuscumulative depreciation (see below) and impairment losses (see sectionentitled Impairments). Acquisition value of computer systems developed oradapted in-house includes licenses plus any expenses for remuneration ofemployees and consultants that may be considered to be directly attributableto the computer system in question.

AmortizationAmortization is reported in the income statement on a linear basis over theestimated useful life of assets, unless such useful life is undefined. Goodwilland intangible assets with an undefined useful life are reviewed to ascertainany need for impairment on an annual basis or as soon as there is an indicationthat the asset in question has been impaired. HL Display reported no assetswith undefined useful life in 2006. Other intangible assets are amortizedfrom the date on which they become available for use.

The useful life is:– computer systems 4 years

Research and developmentExpenditures for development, where the results are used to achieve new orimproved products or processes, are capitalised and recognized as an assetin the balance sheet if the product or process is technically and commerciallyviable and the company has sufficient resources to complete the developmentand then use or sell the intangible asset. The reported value includes alldirectly attributable expenses such as costs of materials and services, salaries

and wages and other indirect costs that can be attributed to the asset in areasonable, consistent way. Other development expenditures are reported inthe income statement as production material cost or product cost as they areincurred. In HL Display's balance sheet capitalised development expenses arereported at acquisition cost minus cumulative depreciation and any impairmentlosses as tangible non-current assets. The reason is that once a decision hasbeen made on commercial production, product development work essentiallyconsists of designing the production equipment required to manufacture the product.

InventoriesInventories are valued at the lower of the acquisition cost and the net realisablevalue. The acquisition cost is calculated as weighted average prices using thefirst in, first out principle (FIFO) and includes costs incurred in the acquisitionand transport to the current location and status. For products manufacturedin-house and work in progress the acquisition cost is including a reasonableproportion of indirect manufacturing costs based on normal capacity.

The net realisable value is the estimated sale price in current operations,with a deduction for estimated costs of production and to achieve a sale.

Impairments, recoverable amounts and reversalsThe carrying amounts of the assets, with the exception of inventories anddeferred tax liabilities, are tested at each balance sheet date to assess whetherthere is any indication of impairment losses.

If there is such an indication, the asset’s recoverable amount is calculatedas the higher of fair value less costs to sell and value in use. The value in useis calculated by discounting estimated future cash flows at a discount factortaking the risk-free interest and the risk relating to the specific asset into account.An asset that is dependent on other assets is attributed to the smallest cash-generating unit for which independent cash flows can be identified. There is animpairment loss that affects the income statement if the recoverable amountis less than the carrying amount.

If there is a change in the calculations used to determine the recoverableamount, the impairment loss is reversed. However, impairment losses ofgoodwill are never reversed.

An impairment loss is only reversed if the asset’s reported value after recoverydoes not exceed the assets value before impairment less any depreciationthat would have been performed.

Goodwill and other intangible assets with an indefinable useful life weretested for impairment as at 1 January 2004 (transition date to IFRS).Goodwill was deemed impaired and fully written down.

Share capitalDividends are reported as a liability in the parent company once the Annualgeneral meeting of shareholders has approved the proposed dividend.

Earnings per shareCalculation of the earnings per share is based on this year’s profit in theGroup that is attributable to the parent company’s shareholders and to theaverage number of shares outstanding during the year. When calculating theearnings per share after dilution, the profit/loss and the average number ofshares are adjusted in order to take into consideration the effects of diluted,potential ordinary shares which have arisen from employee stock optionprogrammes during the period in question.

Employee benefits Defined contribution pension plansObligations in respect of the cost of defined contribution plans are reportedas a cost in the income statement as they arise.

››


NOTES

Defined benefit pension plansHL Display has defined benefit pension plans for employees in Norway, Austriaand France. The Group’s net obligation with regard to these plans is calculatedseparately for each plan by means of an estimate of the future benefits thatemployees have earned through their employment during both the current periodand previous periods; these benefits are discounted to a net present value,and the fair value of any managed assets is deducted. The discount rate is themarket rate for government bonds with a corresponding term. The calculationis performed by a qualified actuary using the projected unit credit method.

The Corridor Rule will be applied. Consequently, any part of actuarial profitsand losses in excess of 10 percent of the largest commitment’s current valueand the plan assets’ fair value is reported over the income statement overthe average remaining service period of those covered by the plan.

When the calculation leads to an asset for the Group, the reported value ofthe asset is limited to the net result of unreported actuarial losses and unre-ported costs of employment during earlier periods and the current value offuture repayments from the plan or reduced future payments into the plan.

When the benefits in a plan are improved, the proportion of increased bene-fits relating to the employees’ employment during earlier periods is reportedas an expense to the income statement on a linear basis, allocated over theaverage period until the benefits have been earned in full. If the benefits havebeen earned in full, an expense is reported directly in the income statement.

Severance payCosts for severance pay are reported only if the company is demonstrativelyobliged, without realistic opportunities to withdraw, by a formal detailed planto terminate employment before the normal point in time.

Short-term benefitsShort-term benefits to employees are calculated without discounting andreported as a cost when the related services are received.

Provisions are reported for anticipated costs for profit sharing and bonus pay-ments when the Group has entered into a valid legal or informal undertaking tomake such payments as a result of services provided by employees, and it ispossible to calculate the extent of the financial undertaking in a reliable fashion.

Share-based benefitsAn options programme enables employees to acquire shares in the company.The fair value of the allocated options is reported as costs for personnel withan equivalent increase of equity. The fair value is calculated at the point intime when the allocation is made and spread over the vesting period. The fairvalue of the allocated options is calculated using the Black & Scholes formulaand the conditions and prerequisites that applied at the point of allocationare taken into consideration. The expense that is reported is the equivalentof the fair value of an estimate of the number of options that are expected tobe subscribed. This expense is adjusted in the following periods in order toreflect the actual amount of options earned. However adjustment is not madewhen a decrease is only caused by the fact that the share price does notachieve the required level for the options to be cashed in.

Social costs relating to equity-settled share-based payments to employeesas recompense for services purchased are written off over the accountingperiods during which the services are provided. Provisions for social insurancecharges are based on the fair value of the options at the reporting date. Thefair value is calculated using the same formula as that used when the optionswere issued.

ProvisionsA provision is reported in the balance sheet when the Group has an existinglegal or informal obligation as a consequence of a past event, and it is probablethat an outflow of financial resources will be required to regulate the obligation,and a reliable estimate of the amount can be made.

RestructuringA provision for restructuring is reported when the Group has established andapproved a formal restructuring plan, and the restructuring has either commen-ced or been publicly announced. No provision is made for future operating costs.

Loss-making contractA provision for a loss-making contract is reported when the benefits that theGroup expects to receive from a contract are lower than the unavoidable costsof fulfilling the obligations under the contract.

Non-current assets held for sale and discontinued operationsThe reason why a non-current asset (or a divestment group) is classified as aholding for sale is that its reported value will be recovered primarily throughthe sale and not through utilisation.

A discontinued operation is a part of a company’s business that representsan independent line of business or a significant business within a geographicalregion, or is a subsidiary that has been acquired for the sole purpose of beingresold.

Contingent liabilitiesA contingent liability is reported when there is a possible commitment originatingfrom a past event but the outflow of resources is contingent on one or moreuncertain future events or, when there is a commitment that is not reported asa liability or provision because it is not probable that an outflow or resourceswill occur.

Events after the balance sheet dateInformation shall be provided concerning significant events that have occurredafter the balance sheet date, but prior to the point in time when the financialstatements are signed, and that are not of the nature that they will affect thebalance sheets and income statements. If significant events have occurred,information will be provided in the Directors’ report or in a separate note.

The parent company’s accounting principlesThe parent company has produced its annual accounts in accordance withthe Swedish Annual Accounts Act (1995:1554) and the Financial AccountingStandards Council’s recommendation RR 32:05 Accounting for Legal Entities.In addition statements issued by the Swedish Financial Accounting StandardsCouncil’s Emerging Issues Task Force have been applied. Under RR 32:05the parent company must apply all of the EU-approved IFRS and statementsas far as is possible within the framework of the Swedish Annual AccountsAct and with due regard to the relationship between accounting and taxationin the annual accounts for the legal entity. This recommendation specifieswhich exceptions and additions must be applied with regard to IFRS.

The accounting principles described below for the parent company havebeen applied consistently for all periods presented in the parent company’sfinancial statements.

Group contributions and shareholders’ contributionsHL Display is reporting group contributions and shareholder’s contributions inaccordance with the statement issued by the Swedish Financial AccountingStandards Council’s Emerging Issues Task Force (URA 7). Shareholders’contributions are reported directly to equity at the recipient and are capitalisedas shares and participations by the donor, if no impairment loss prevails.

Group contributions are reported according to their financial nature. Thismeans that Group contributions issued for the purpose of reducing the Group’stotal tax expense are reported directly to retained profits, with a deduction forthe current tax effect. Group contributions that are in substance a dividendare reported as a dividend. In this case Group contributions received, and theircurrent tax effect, are reported in the income statement and that Group contri-bution issued, and its current tax effect, affects retained profits. A Group contri-bution that is in substance a shareholder contribution is reported, with dueconsideration of the current tax effect for the recipient, directly to retainedprofits. The donor reports the Group contribution and its current tax effect asan investment in interests in Group companies, if no impairment loss prevails.

Leased assetsIn the parent company, all leasing agreements are reported according to regu-lations for operational leasing.

Income tax expensesIn the parent company, untaxed reserves plus deferred tax debt are reported.In Group accounts, however, untaxed reserves are divided between deferredtax debts and equity.

››


NOTES

Note 2 Financial Risks and Financial Policies

The Group is exposed to various types of financial risks in its business.Financial risks mean fluctuations in the company’s profits and cash flows

as a result of changes in exchange rates or interest rate levels as well as refinancing risks and credit risks. HL Display’s financing and financial risksare managed under the control and auspices of the Board. Financing activitiesare centralised within the subsidiary HL Financial Services AB, which acts asan internal bank, with responsibility for financing and managing financial risks.HL Financial Services AB’s ultimate objective is to provide cost-efficient finan-cing and to minimise negative effects on the Group’s results caused bymarket fluctuations.

Liquidity risksA liquidity risk means a risk that financing cannot be obtained at all, or only ata significantly increased cost. As well as reported cash and cash equivalentsand unutilised bank overdraft facility (see note 30), there is a credit agreementto the order of MSEK 15 that can be used without any additional consideration.

It is HL Display’s policy to only invest its liquid funds in banks or bank-relatedinstitutions. The instruments in which the funds are invested must, if they arenot simple cash deposits, be fully liquid so that there is no risk in terms of timeor value. The credit rating institute Dun & Bradstreet has rated the parentcompany’s creditworthiness as AAA.

Interest rate riskInterest rate risk is the risk that the value of a financial instrument varies due to changes in market interest rates. An interest rate risk can consist of a change in fair value, a price risk, or changes in cash flow, a cash flow risk.One significant factor that affects the interest rate risk is the fixed-rateinterest term. Long fixed-rate interest terms primarily affect the price risk,while shorter fixed-rate interest terms affect the cash flow risk. The interestrate risk in HL Display is low, as there is a high degree of self-financing.Interest-bearing liabilities are almost exclusively subject to variable interestrates. The equity/assets ratio was 44 per cent at the year-end, and theinterest-bearing net liability was MSEK 40 (108). Net interest expenseamounted to MSEK -10 (-10). The company’s interest-bearing liabilities at theyear-end totalled MSEK 203 (189), of which long-term liabilities totalledMSEK 102 (108). The average effective interest rate on interest-bearing long-term liabilities was 5.4 per cent and on short-term liabilities 5.0 percent. Of long-term liabilities, approx. MSEK 2.6 falls due in more than 5 years.

Credit riskThe credit risk within HL Display arises almost exclusively on trade receivables.

HL Display experiences a very low level of bad debt losses The company’scustomers are large, well-established companies that are financially sound anddistributed over several geographical markets. The biggest single customeraccounts for five per cent of turnover. Most orders are low in value. HL Displaycontrols the risk of bad debts through well defined routines for credit control,debt collection and invoicing of interest on overdue payments.

Currency risksTransaction exposureHL Display’s transaction exposure relates to purchases and sales in foreigncurrencies. The policy is to invoice every subsidiary in their local currency. In theevent that a country’s currency is not convertible, the subsidiary is invoicedin SEK. External distributors are always invoiced in SEK. The Swedish kronawas strengthened during 2006 towards inflow currencies, the most importantof which are the euro, the British pound, the Russian rouble and the Norwegiankrone. Purchases that affect exposure consist mainly of operating expensesin the foreign sales companies.

The Group’s cash flow exposure is divided among the following currencies:

The Group’s net flow AmountCurrency 2006 2005MEUR 32 26MGBP 4 5MRUB 270 212MUSD 3 -2MNOK 38 30

In the item USD, also currencies linked to the USD are accounted for.

HL Display’s financial policy states that the Group should generally not hedgefuture order flows in foreign currencies, but that the Board may decide to makeexceptions. One exception from this policy was made in 2005, when parts ofthe Group’s forecasted sales in euro and British pounds were hedged fromAugust 2005 and one year forward, in order to reduce uncertainty whileguiding the company towards the profit objective. The hedge was renewedfrom September 2006 to year end 2006, when all forward contracts expired.

The exchange rate means the average contract exchange rate.

The Group Exchange ExchangeForward contracts rate MEUR rate MGBP2005 9,403 11 13,486 2,92006 9,349 24 13,459 4,7

The forward contracts used to hedge forecast transactions are classified ascash flow hedges. No forward contracts remained at the balance sheet date.

Translation exposureMonetary net assets (equity in subsidiaries) in currencies other than the func-tional currency (SEK) will fluctuate according to exchange rate fluctuations. Thisrisk is known as translation exposure. As subsidiary companies are extremelyclosely connected to the parent company, they have been assessed as havingthe same functional currency, consequently exchange rate gains/losses thatoccur when recalculating the financial reports in their income statements arereported as translation differences.

Foreign monetary net assets in the Group are divided primarily among thefollowing currencies:

The Group AmountCurrency 2006 2005MEUR 6 7MGBP -1 0

It is HL Display’s policy to hedge most of the net monetary assets in its foreignvalue in subsidiaries. Put simply, this means that equity in foreign subsidiariesis hedged.

Furthermore, it is HL Display’s policy to hedge most of the loan portfolioagainst foreign subsidiaries. Hedging instruments are reported at theexchange rate at the year-end, and unrealised exchange rate differences arereported to profits. The effects on profits of the hedging contracts are reportedin net financial items and offset against the translation difference arising inthe financial net when converting foreign subsidiaries’ financial statements.

Sensitivity analysisA general one per cent change in the market interest rate would mean thatthe Group’s profit before taxes would change by approximately MSEK 0.8. It has been calculated that a general one per cent change in the value of theSEK against the euro would affect the Group’s profit before taxes by approxi-mately MSEK 2.4 for the year ending 31 December 2006. Value changes inhedging contracts have been included in these calculations. For an explanationof the Group’s sensitivity to other factors, see Risk and sensitivity analysis onpage 32.

Fair valueThe GroupInterest-bearing liabilities and financial leasing liabilitiesAs all interest-bearing liabilities and financial leasing liabilities have variableinterest rates, the carrying amount is considered to reflect the fair value.

Trade receivables and payablesFor trade receivables and payables with an outstanding term of less than oneyear, the carrying amount is considered to reflect the fair value. There are notrade receivables or payables with a term of more than one year.

The parent companyThe parent company has no financial instruments at all with a valuation thatdeviates from their fair value.


NOTES

Note 3 Net sales for each significant type of income

The Group The parent companyKSEK 2006 2005 2006 2005Product sales 1,399,468 1,249,213 – –Installations and

other services 48,670 35,611 84,624 88,942Total sales 1 448,138 1,284,824 84,624 88,942

KSEK 84,129 (88,802) relates to consultancy services sold to Group companies.

Note 4 Segment Reporting

HL Display applies IAS 14 Segment Reporting. As a primary basis for segmen-tation HL Display uses one single, vertically integrated line of business, andas a secondary basis for segmentation it uses geographical markets. Thesebases for segmentation correspond with the company’s internal reporting.

HL Display is a distinct niche company with production and sales of a homo-genous product range. The products have varying functions, but are designedfor the same areas of application (in-store communication and merchandising).The company’s opportunities and risks are on a global market, where thecrucial factor for success is to be a supplier to the leading multinational andnational retail chains and brand manufacturers (the company’s key accounts).HL Display achieves this by means of global key account management, by beinga leader in cost-efficient production, logistics and sales, by being innovativein product development and design, and by offering a broad range of products.

Lines of businessThe lines of business constitute the Group’s primary segment. The Groupconsists of one single, vertically integrated line of business.

See pages 36-38 for the income statement and balance sheet.

Geographical marketsGeographical regions constitute the Group’s secondary segment. The Group’ssegments are divided into the following geographical regions: the Nordic region,Western Europe, Eastern Europe, Asia/Australia and North America. Thebusiness operations in the Nordic region, Western Europe, Eastern Europeand Asia/Australia are run primarily through the Group’s own subsidiaries. In North America the business is run as a joint venture.

The information presented with regard to the segments’ income relates to thegeographical regions, grouped according to where the customers are located.Information relating to the segments’ assets and investments during the periodin non-current assets is based on the geographical regions, grouped accordingto where the assets are located.

Geographical regionsThe Group Nordic region Western Europe Eastern Europe North America Asia/Australia TotalKSEK 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005External income 273,632 231,008 766,781 745,599 281,165 218,435 32,321 22,009 94,239 67,773 1,448,138 1,284,824Assets 469,583 352,679 237,184 256,067 80,647 70,298 20,001 27,696 69,146 53,731 876,561 760,471Investments 22,829 31,933 1,521 987 2,534 1,927 933 599 4,424 4,159 32,241 39,604

The parent company Nordic region Western Europe Eastern Europe North America Asia/Australia TotalKSEK 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005Net Sales 71,208 75,628 9,866 10,119 2,476 1,900 – 10 1,074 1,285 84,624 88,942

Note 5 Discontinued operations

Profit/loss from discontinued operations The GroupKSEK 2006 2005Net sales – 21,935Cost of goods/services sold – -28,195Selling expenses – -1,831Administrative expenses – -471Other operating income/expenses – -791Financial expenses – -1,354Profit/loss before taxes – -10,707

Income taxes – 2,998Profit/loss after tax – -7,709

Profit/loss per share from discontinued operationsbefore dilution (SEK) – -1.00after dilution (SEK) – -1.00

Discontinued operationsIn 2004 production was discontinued at the subsidiary HL Display FalkenbergAB. Production involved shop-fittings made in metal. The final costs affectedprofit in 2005.

Note 6 Other operating income

The Group The parent companyKSEK 2006 2005 2006 2005Exchange rate gains on

receivables/liabilities of an operative nature 812 732 – –

Royalty income 1,186 1,336 1,186 1,336Rental income 1,408 1,627 1,408 1,627Other 1,253 879 37 38Total 4,659 4,574 2,631 3,001

Note 7 Other operating expenses

The Group The parent companyTSEK 2006 2005 2006 2005Exchange rate losses on

receivables/liabilities of an operative nature -2,737 -2,713 – –

Withholding tax – -579 – –Other -2,539 -1,613 – –Total -5,276 -4,905 – –


NOTES

Note 8 Employees and personnel expenses

Expenses for employee benefits GroupKSEK 2006 2005Salaries and remuneration etc. 302,533 300,281Pension costs defined benefit

plans (see note 31) 868 1,555Pension costs defined contribution plans 15,363 17,195Other social security contributions 75,362 77,556

394,126 396,587

Average number of which of whichof employees 2006 men 2005 menThe parent companySweden 44 77% 52 73%Total for parent company 44 77% 52 73%

SubsidiariesNordic region 424 63% 447 73%Western Europe 253 55% 260 55%Eastern Europe 114 48% 118 51%Asia 114 61% 56 54%Total in subsidiaries 905 62% 881 63%Group total 949 63% 933 64%

Gender distribution in the executive management2006 2005

Proportion ProportionThe parent company of women of womenThe parent companyThe Board 13% 13%Senior management 0% 0%Group totalThe Board 6% 2%Senior management 25% 22%

Salaries, other remuneration and social security expenses2006 2005

Salaries and Social Salaries and Social KSEK remuneration security exp remuneration security. expThe parent company 30,194 14,423 27,913 16,731(of which pension cost)1) 5,245 6,725Subsidiaries 272,339 77,170 272,368 79,757(of which pension cost) 10,986 12,025Group total 302,533 91,593 300,281 96,306(of which pension cost)2) 16,231 18,750

1) Of the parent company’s pension costs 111 (245) relates to the Board andthe CEO. The company’s outstanding pension commitments to these peopleamount to KSEK 128 (0).2) Of the Group’s pension costs, 1,121 (1,927) relates to the Boards and theCEOs. The company’s outstanding pension commitments to these peopleamount to KSEK 0 (0).

Salaries and other remuneration per country and per between the Boardmembers and other employees

2006 2005Board Other Board Other

KSEK and CEO employees and CEO employeesThe parent companySweden 3,772 26,422 2,197 25,716(of which bonus, etc.) 1,184 903 – 154Parent company total 3,772 26,422 2,197 25,716(of which bonus, etc.) 1,184 903 – 154

SubsidiariesNordic region 5,746 138,795 5,579 140,361(of which bonus, etc.) 580 4,254 441 1,909Western Europe 10,656 84,919 10,849 87,697(of which bonus, etc.) 990 5,773 741 4,363Eastern Europe 5,092 15,829 5,731 14,628(of which bonus, etc.) 668 1,969 539 1,926Asia/Australia 970 10,332 821 6,702(of which bonus, etc.) – 678 – 503Subsidiaries, total 22,464 249,875 22,980 249,388(of which bonus, etc.) 2,238 12,674 1,721 8,701Group total 26,236 276,297 25,177 275,104(of which bonus, etc.) 3,422 13,577 1,721 8,855

Of the salaries paid to other employees in the Group, KSEK 17,585 (26,253)relates to senior executives other than the Board and the CEO.

Severance paymentThere is a mutual period of notice of 4-6 months in force between HL Displayand the Managing Directors in the Group. There is a mutual period of noticeof 4-6 months in force between the company and other senior executives.

Loans to senior executivesThere are no loans to senior executives.

The parent companyTotal absence through illness as a percentage of normal working hours,employees in the Parent Company.

2006 2005Men 1.7% 2.0%Women 2.1% 4.2%

Age -29 0.7% 2.2%Age 30-39 2.2% 3.2%Age 50- 0.3% 1.1%

Long-term absentees 0.6% 1.2%Total 1.9% 2.7%

For information on items such as employee benefits after the end of employ-ment and share-based remuneration, see note 31 Post-employment benefits,share-based benefits and remuneration to senior executives.

1)

2)


NOTES

Note 9 Lease agreements

Assets that the Group hires through finance lease agreements are reportedas Buildings and land, and also as Machinery and equipment. Cumulativeacquisition values total KSEK 118,625 and cumulative depreciation totalsKSEK 34,531. KSEK 53,638 is reported as a long-term liability and KSEK8,200 as a short-term liability.

Lease agreements in which the company is the lesseeNon-cancellable lease payments amount to:

Lease of Machinery and equipmentThe Group The Group The parent company

Finance Operating Operatingleases leases leases

KSEK 2006 2005 2006 2005 2006 2005Lease payments 5,402 5,529 24,533 20,248 8,135 7,008

Minimum lease paymentsFall due for payment:Within one year 1,612 5,402 17,059 15,258 8,135 6,952Between one year

and five years – 1,612 20,382 15,092 8,135 7,008Later than five yearsTotal 1,612 7,014 37,441 30,350 16,270 13,960

Lease of Properties and premisesThe Group The Group The parent company

Finance Operating Operatingleases leases leases

KSEK 2006 2005 2006 2005 2006 2005Lease payments 6,458 6,248 21,120 19,609 1,438 1,311

Minimum lease paymentsFall due for payment:Within one year 6,674 6,309 19,318 22,983 1,499 1,480Between one

year and five years 24,517 24,785 25,704 40,339 3,089 3,049

Later than five years 45,671 52,077 321 7,611 – –

Total 76,862 83,171 45,343 70,933 4,588 4,529

Reconciliation of current finance leasingGroup 2006 Machinery and equipment Properties TotalMinimum lease payments 1,612 76,862 78,474Leasing liability 1,566 60,272 61,838Finance charge 46 16,590 16,636

The Group’s factory premises in Sundsvall and Falkenberg are rented fromOptimus KB – an associated company. Rental levels vary according to themarket interest rate and debited rent for 2006 amount to KSEK 5,491. OptimusKB is reported according to the acquisition value method as opportunities totransfer profits are limited. The company agreement includes a pre-emptionclause.

Note 10 Operating expenses

KoncernenKSEK 2006 2005Cost of goods/services sold -779,736 -695,174Non-production staff costs -293,875 -277,926Cost of premises -33,289 -23,976Communication costs -16,109 -17,631Depreciation -44,379 -46,798Other operating expenses -174,023 -160,592

-1,341,411 -1,222,097

Note 11 Net Financial items

GroupKSEK 2006 2005Interest income 1,933 1,970Net translation difference 1) – 2,092Net exchange rate changes – 6,531Other financial income 493 361Financial income 2,426 10,954

Interest expenses -11,125 -10,790Net translation difference 1) -2,474 –Net exchange rate changes -2,313 –Other financial expenses -987 -1,171Financial expenses -16,899 -11,961Net financial items -14,473 -1,007

1) Without currency hedging, the translation difference would have totalledKSEK -3,505 (3,185). See also note 2.

The parent companyProfit/loss from participations

in Group companiesKSEK 2006 2005Dividends 122,811 96,297Impairment losses -11,240 –

111,571 96,297

The parent companyProfit/loss from

other securities and receivables Interest incomethat are non-current assets and similar profit items

KSEK 2006 2005 2006 2005Interest income,

Group companies 4,406 5,422 – –Interest income, others 209 – 686 302Net exchange rate changes – – – 364

4,615 5,422 686 666

The parent companyInterest expenses

and similar profit itemsKSEK 2006 2005Interest expenses, Group companies -631 –Interest expenses, others -173 -383Net exchange rate changes -363 –

-1,167 -383

Note 12 Approriations to untaxed reserves

The parent companyKSEK 2006 2005Depreciation in excess of plan, computer systems – 33Depreciation in excess of plan, machinery and equipment -900 20Tax allocation reserve, provision -10,974 –Tax allocation reserve, reversal – 1,950Total -11,874 2,003


NOTES

Note 13 Taxes

The Group The parent companyKSEK 2006 2005 2006 2005Current tax expense Current income tax per the year -28,288 -19,371 -12,217 -10,340Current income-tax related to previous years -12 -493 – –

-28,300 -19,864 -12,217 -10,340

Deferred tax cost (-)/tax income (+)Deferred tax relating to temporary differences -3,292 1,863 – –Deferred tax income relating to tax loss carryforwards recognised during the year 3,792 2,182 – 837Deferred tax expense relating to the use of tax loss

carryforwards recognised in prior years -2,580 -449 -837 –-2,080 3,596 -837 837

Total tax expense -30,380 -16,268 -13,054 -9 503

Current tax attributable to discontinued operations – -2,998 – –

Total reported tax expense reported in the income statement -30,380 -19,266 -13,054 -9,503

Tax expense/income taken directly to equityCurrent tax relating to expense/income taken directly to equity (Group contributions) – – 2,425 9,637

Deferred tax expense/income in the Group and in the Parent company is reported in full in the income statement.

Reconciliation between profit/loss before taxes and tax expense The Group The parent companyKSEK 2006 2005 2006 2005Profit/loss before taxes 92,254 61,720 74,604 77,290 Tax according to Swedish tax rate, 28% -25,831 -17,282 -20,889 -21,641

Adjustment for other tax rates outside Sweden -379 -1,451 – –Adjustment of previous years’ current tax -12 -493 – –

Tax effect of reassessment of tax loss carryforwards due to changed estimates, tax rates and exchange rates -2,645 313 – –

Tax effect of deficits for which tax assets were not taken into account -636 -714 – –

Tax effect of non-taxable share dividends – – 11,167 12,345 Tax effect of impairment loss of shares in subsidiaries – – -3,147 – Tax effect of other non-taxable or non-deductible items -877 361 -185 -207 Current tax expense -30,380 -19,266 -13,054 -9,503

Specification of deferred tax assets and liabilities The Group The parent companyKSEK 2006 2005 2006 2005Tax loss carryforwards 9,067 7,855 – 837 Internal profit in inventories 6,702 5,039 – –Other temporary deductible differences 6,215 6,658 – –Deferred tax assets 21,984 19,552 – 837

Untaxed reserves relating to machinery and inventories -9,848 -9,956 – – Untaxed reserves, tax allocation reserves -8,562 -5,374 – – Other temporary taxable differences -4,124 -2,693 – –Deferred tax liabilities -22,534 -18,023 – –

Net deferred tax assets in the balance sheet 17,923 13,749 837 837

Net deferred tax liability in the balance sheet -18,473 -12,220 – –

In the Group deferred tax assets totalling KSEK 4,866 (6,134) have been reported, relating to tax loss carryforwards in companies that have reported losses inthe last two financial years. These are companies where Group contributions and other tax-balancing measures can be used, as well as newly started companiesand companies where growth in revenue is prioritized ahead of profitability during a market development phase.

In the Group deferred tax assets were not recognised for tax loss carryforwards of KSEK 12,185 (6,331). There are no time restrictions or legal obstacles tothe potential utilisation of these tax loss carryforwards. A recognised tax loss carryforward of KSEK 123 (321), has a limited asset-right of five years.

Otherwise there are no restrictions on recognised tax loss carryforwards.Temporary differences between the Group and the parent company in the book value of subsidiaries and joint ventures total KSEK 89,923 (89,935).

These values can be realized without tax consequences. However, this is at present only possible through tax exempt dividends.


NOTES

Note 14 Earnings per share

Earnings per share for total, remaining and discontinued operations

Before dilution After dilutionSEK 2006 2005 2006 2005Earnings per share 7.87 4.59 7.85 4.58Earnings per share from

remaining businesses 7.87 5.59 7.85 5.58Earnings per share from

discontinued operations – -1.00 – -1.00

The calculation of the numerators and denominators used in the above calcu-lations is specified below.

Earnings per share before dilutionCalculation of the earnings per share for 2006 was based on the profit for the year attributable to the parent company’s shareholders, totalling KSEK 60,524 (35,289) and a weighted average number of outstanding shares in2006, totalling 7,693,508 (7,688,872).

Earnings per share after dilutionCalculation of the earnings per share after dilution for 2006 was based on theprofit for the year attributable to the parent company’s shareholders, totallingKSEK 60,524 (35,289) and a weighted average number of outstanding sharesin 2006, totalling 7,710,959 (7,709,538). Weighted average number of outs-tanding shares has been calculated as follows:

Weighted average number of outstanding shares, after dilution 2006 2005Weighted average number of shares

during the year, before dilution 7,693,508 7,688,872Effect of issued warrants 17,451 20,666Weighted average number of shares

during the year, after dilution 7,710,959 7,709,538

Instruments that can have a potential dilution effect and changes after the year-endIn 2006 the company issued an employee stock option scheme, the sub-scription price of which (SEK 157 per share) exceeded the average price ofthe shares (SEK 145 per share). These options are therefore not consideredto have a dilution effect and have been excluded from the calculation of theprofit/loss per share after dilution. If, in future, the stock exchange price ofoutstanding shares in HL Display rises to a level above the redemptionprices, these warrants will cause dilution.

Note 15 Participations in joint ventures

GroupThe Group has 50 per cent holdings in the joint venture companies HL Trion ABand Trion HL LLC, whose primary operations involve production in the field ofwire-bending and extrusion respectively.

The average number of employees was 38, 23 of whom were male.The Group’s financial statements include the items below, which constitute

the Group’s ownership of the joint venture companies’ assets, liabilities,income and expenses.

KSEK 2006 2005Net sales 38,437 31,974Expenses -38,634 -33,757Profit/loss before taxes -197 -1,783

Non-current assets 10,987 13,357Current assets 12,396 14,104Total assets 23,383 27,460

Current liabilities 5,832 8,241Non-current liabilities 5,517 7,384Total liabilities 11,349 15,625Net assets/net liabilities 12,034 11,835

Note 16 Investment commitments

In 2006 the Group entered into agreements to acquire non-current assets tothe order of KSEK 7,024 (4,456). Through its participation in joint venturecompanies (see note 15), the Group has committed to investing KSEK 369(738). It is expected that these commitments will be regulated during thefollowing financial year.

Note 17 Intangible assets

Acquisition costIntangible assets developed in-house

The Group The parent companyKSEK, 2005 Computer systems Computer systemsOpening balance 26,843 11,157Sales and disposals -1,271 –Expenditure capitalised during the year 1,453 1,093Closing balance 27,025 12,250

Intangible assets developed in-houseThe Group The parent company

KSEK, 2006 Computer systems Computer systemsOpening balance 27,025 12,250Sales and disposals -645 –Expenditure capitalised during the year 4,361 4,296Closing balance 30,741 16,546

Cumulative depreciation and impairment losses;Intangible assets developed in-house

The Group The parent companyKSEK, 2005 Computer systems Computer systemsOpening balance -23,374 -9,947Sales and disposals 1,271 –Depreciation for the year -2,078 -817Closing balance -24,181 -10,764

Intangible assets developed in-houseThe Group The parent company

KSEK, 2006 Computer systems Computer systemsOpening balance -24,181 -10,764Sales and disposals 643 –Depreciation for the year -1,633 -847Closing balance -25,171 -11,611

Carrying amountsAs at 01-01-2005 3,469 1,210As at 31-12-2005 2,844 1,486

As at 01-01-2006 2,844 1,486As at 31-12-2006 5,570 4,935

Depreciation and impairmentsDepreciation is included in the following items in the income statement

The Group The parent companyTSEK 2006 2005 2006 2005Administrative expenses -1,633 -2,078 -847 -817

Intangible assetsThe company’s intangible assets have been developed in-house. The majorityof these consist of computer systems used to achieve an improved productor process. In accordance with IAS 38, these are capitalised.

There are no intangible assets with undefined useful life. A useful life of 4years is applied.

The result of the impairment test shows that there are no significant reductions in the value of intangible assets, consequently no write-down has been carried out.


NOTES

Note 18 Property, plant and equipment

The Group The parent companyRebuilding of

Buildings Machinery and other party's Machinery andKSEK, 2005 and land equipment property Total equipmentAcquisition costOpening balance 100,485 402,546 11,137 514,168 3,097Purchases during the year – 37,137 1,965 39,102 231Sales and disposals – -7,838 – -7 838 -18Closing balance 100,485 431,845 13,102 545,432 3,310

KSEK, 2006Opening balance 100,485 431,845 13,102 545,432 3,310Purchases during the year – 27,019 863 27,882 230Sales and disposals – -15,869 -102 -15,971 –Closing balance 100,485 442,995 13,863 557,343 3,640

KSEK, 2005Depreciation and impairment lossesOpening balance -19,732 -259,222 -4,580 -283,534 -2,627Depreciation for the year -2,427 -41,665 -628 -44,720 -208Sales and disposals – 6,759 – 6,759 6Closing balance -22,159 -294,128 -5,208 -321,495 -2,829

KSEK, 2006Opening balance -22,159 -294,128 -5,208 -321,495 -2,829Depreciation for the year -2,427 -39,507 -812 -42,746 -222Sales and disposals – 15,290 102 15,392 –Closing balance -24,586 -318,345 -5,918 -348,849 -3,051

Carrying amounts1 January 2005 80,753 143,324 6,557 230,634 47031 December 2005 78,326 137,717 7,894 223,937 481

1 January 2006 78,326 137,717 7,894 223,937 48131 December 2006 75,899 124,650 7,945 208,494 589

Tax assessment values, GroupKSEK 2006 2005Tax assessment values, buildings (in Sweden) 43,380 36,586Tax assessment values, land (in Sweden) 6,758 4,979

Depreciation and impairment losses are distributed to the following rows inthe income statementThe Group Depreciation Impairment lossesKSEK 2006 2005 2006 2005Cost of goods sold -37,146 -39,019 – –Selling expenses -2,177 -2,221 – –Administrative expenses -3,132 -3,292 – –Research and

development expenses -291 -188 – –Total depreciation and

impairments for property,plant and equipment -42,746 -44,720 – –

The parent company Depreciation Impairment lossesTSEK 2006 2005 2006 2005Selling expenses -5 -5 – –Administrative expenses -113 -131 – –Research and

development expenses -104 -72 – –Total depreciation and

impairments for property,plant and equipment -222 -208 – –

Leased production equipmentThe Group leases production equipment under a number of different financiallease agreements. The variable charges are calculated on the leasing company’sacquisition cost for the lease object. When lease agreements cease, the Grouphas options to buy the equipment at a favourable price. On 31 December 2006the carrying value of leased assets was MSEK 8 (13). The leased assetsconstitute security for leasing liabilities (see note 9).

Leased buildings and landReported values relate to an owned business property in Lesjöfors and business properties in Falkenberg, Sundsvall and Tours, which are usedunder financial lease agreements. When the lease agreements expire, theGroup has the right to buy the properties. On 31 December 2006 the carryingvalue of leased assets was MSEK 76 (78). The leased assets constitutesecurity for leasing liabilities (see note 9).

Research and development expendituresResearch and development expenditures that are reported in the incomestatement as expenses comprise expenditures relating to research in productiontechnologies, materials and products, as well as product development expensesuntil a decision is made to complete development of the product. Once a

development decision has been made, the expenditures are recognisedassets in the balance sheet, in accordance with IAS 38 Intangible assets.However, as subsequent product development work consists almost exclusivelyof designing the production equipment required to manufacture the product,the expenditures are reported as Property, plant and equipment.


NOTES

Note 19 Investments in group companies

Corporate Capital Number Book value Book valueDirectly owned Reg. office identity number share, % Votes, % of shares 31-12-2006 31-12-2005HL Display Belgium N.V. Antwerp 0431.244.677 100 100 1,000 283 283HL Display Ceská republika s.r.o Prague 65410394 100 100 1 26 26HL Display Deutschland GmbH Langenfeld HRB2713 100 100 1 2,614 2,614HL Display d.o.o. Ljubljana 47556722 100 100 1 93 93HL Display d.o.o. Beograd Beograd SR103831628 100 100 1 5 5HL Display España S.L Madrid B843488213 100 100 100 32 32HL Display Falkenberg AB Falkenberg 556446-0557 100 100 1,500 3,883 12,983HL Display Falun AB Falun 556545-6976 100 100 1,000 100 100HL Display France SAS Tours RCSB377988 100 100 250 268 268HL Display Hungaria Budapest 01-09-667938 100 100 1 487 487HL Display Inc. Wilkes-Barre 23-2869204 100 100 1 1HL Display Latvia SIA Riga 000330382 100 100 100 1,522 1,522HL Display Lesjöfors AB Filipstad 556439-7429 100 100 5,000 2,513 2,513HL Display Ltd Sti Istanbul 428930-376512 100 100 461 1,707 1,707HL Display Nederland BV Bergen op Zoom 30152867 100 100 200 572 572HL Display Norge A/S Asker 955437071 100 100 1,100 5,598 5,598HL Display OOO Moscow 7701211771 100 100 1 832 832HL Display Pictoria AB Filipstad 556654-4952 100 100 1,000 100 100HL Display Polska Sp.zo.o Warszaw 521-04-17-996 100 100 1 236 236HL Display Regional Service Center Bergen op Zoom 20085397 100 100 1,671 4,772 6,912HL Display Romania Bukarest 14633525 100 100 2,500 103 103HL Display Schweiz AG Aarau CH-4003018955-6 100 100 100 543 543HL Display Singapore Pte Ltd. Singapore 200004486H 100 100 1 576 576HL Display Slovensko s.r.o. Bratislava 36547662 100 100 1 1,134 44HL Display Sundsvall AB Sundsvall 556124-0481 100 100 1,500 11,125 11,125HL Display Suzhou Ltd Suzhou 77 68 97 09-7 100 100 1 11,459 7,466HL Display Sverige AB Stockholm 556351-9528 100 100 100 50 50HL Display (UK) Ltd Kirmington 2187037 100 100 10,000 935 935HL Display Ukraine Kiev 09867 100 100 100 223 223HL Display Österreich GmbH Vienna FN140307i 100 100 1 327 327HL Financial Services AB Stockholm 556435-0832 100 100 500 128 128SCI L'Eclipse Tours D 414 745 026 100 100 100 14 14Total 52,261 58,418

Indirectly ownedEnvoy Display Ltd Kirmington 02928820 100 100 100HL Display Karlskoga AB Karlskoga 556457-7202 100 100 500HL Display Shipley Ltd Shipley 256682 100 100 1,000HL Display Hong Kong Ltd Hong Kong 783 663 100 100 2HL Display Malaysia Sdn Bhd Subang Jaya 569116-0 100 100 2HL Display Taiwan Ltd Taipei 27578266 100 100 1HL Display Thailand Ltd Bangkok 10454600434 100 100 1HL Display (Shanghai) Co Ltd Shanghai PRC 310230757570910 50 50 2HL Display Korea Co Ltd Seoul 110111-3042176 100 100 16,800PT. HL Display Indonesia Jakarta 0904.5.51.20945 100 100 100HL Display India Pvt Ltd Mumbai 05MH2006FTC164731 100 100 10,000

The Group owns 50 per cent of the votes in HL Display (Shanghai) Co Ltd. By agreement with the other owner of HL Display (Shanghai) Co Ltd. the group has the right to appoint the management group and owns all of the rights to the name, products and product names. HL Display (Shanghai) Co Ltd. is thereforeconsolidated as a subsidiary.

KSEK The parent companyAcquisition cost 2006 2005Opening balance 84,436 76,965Shareholder contribution 5,083 –Newly started companies – 7,471Closing balance 31 december 89,519 84,436

Cumulative Impairment lossesOpening balance -26,018 -26,018Impairment losses -11,240 –Closing balance 31 december -37,258 -26,018

Carrying amount 52,261 58,418


NOTES

Note 23 Inventories

The Group The parent companyTSEK 2006 2005 2006 2005Raw materials and

consumables 24,694 26,045 – – Work in progress 2,600 2,131 – – Finished goods and

goods for resale 109,072 104,808 – – Work in progress on

behalf of third parties 37 – – –Total 136,403 132,984 – –

Selling expenses for the Group include impairment losses of inventories tothe order of MSEK 5 (5).

Note 24 Trade and other receivables

Trade and other receivables are reported after taking into account uncollectiblereceivable during the year, which totalled KSEK 416 (3,096) in the Group.There were no uncollectible receivables in the parent company.

Note 25 Prepaid expenses and accrued revenue

The Group The parent companyKSEK 2006 2005 2006 2005Prepaid expenses:

rents 4,193 2,808 367 346leasing expenses 3,006 3,058 1,450 1,527insurance expenses 2,077 1,845 254 30IT support

and communication 2,836 2,030 2,836 2,030Accrued interest income 377 374 304 360Other 12,271 12,270 3,879 6,213Total 24,760 22,385 9,090 10,506

Note 26 Other current assets

The parent company’s other assets include tax assets relating to income taxto the order of KSEK – (3,233).

Note 27 Cash and cash equivalents

The GroupKSEK 2006 2005Cash and bank balance

(+ balance in bank overdraft facility) 58 165 47 033Current investments 30,000 –Credit balance in Group account

with parent company 75 079 34 098Total according to cash flow statement 163,244 81 131

Note 20 Parent company investments in associated companies and joint ventures

The parent companyAcquisition costKSEK 2006 2005Opening balance 16,751 16,751Shareholder contribution during the year 396 –Closing balance 31 december 17,147 16,751

The parent company’s directly owned holding in associated companies andjoint venture companies.

Joint venture company, corp. reg. no. and registered office

Voting and capital share Carrying

2005 as a % amountAssociated companiesOptimus KB, 916620-1450, Stockholm 30% 10,000Joint ventures – directly ownedHL Trion AB, 556539-1637, Filipstad 50% 6,751Joint ventures – indirectly ownedTrion HL LLC 50%

16,751

Voting and capital share Reported

2006 as a % valueAssociated companiesOptimus KB, 916620-1450, Stockholm 30% 10,000Joint ventures – directly ownedHL Trion AB, 556539-1637, Filipstad 50% 7,147Joint ventures – indirectly ownedTrion HL LLC 50%

17,147

Note 21 Other non-current receivables

Financial investments that are non-current assetsThe Group The parent company

KSEK 2006 2005 2006 2005Deposits 1,162 819 – –Other 644 644 644 644

1,806 1 463 644 644

Note 22 Parent company receivables from associated companies and joint ventures

Acquisition cost Receivables from Group companiesKSEK 2006 2005Opening balance 241,993 155,891Increases 4,053 242,348Redemptions -1,558 -156,246Closing balance 244,488 241,993

At the year-end the parent company had no receivables from associatedcompanies or joint ventures.


NOTES

Note 28 Equity

The GroupFor a specification of the Group’s equity, see the financial report on page 38.

Share capitalAs at 31 December 2006 the registered share capital comprised 7,727,172(7,688,872) ordinary shares, 913,024 of which are class A and 6,814,148class B. The Group has not issued preference shares.

Holders of ordinary shares are entitled to a dividend as decided by the AnnualGeneral meeting of shareholders. Holders of ordinary shares are entitled tovote at the Annual meeting of shareholders with one vote per share for classA shares and 1/10 vote per share for class B shares.

Hedge reserveThe hedge reserve constitutes the effective proportion of the cumulative netchange in fair value of a cash flow hedging instrument attributable to hedgingtransactions that have not yet occurred.

Retained earningsRetained earnings include profits earned in the parent company and its subsi-diaries, associated companies and joint ventures. Previous allocations to thestatutory reserve are included in this equity item.

DividendAfter closing date the Board has proposed the following dividend. This dividendhas yet to be confirmed and there are no income tax consequences.

KSEK 20071) 2006 2005Dividend, KSEK 27,045 23,066 19,222Dividend per share, SEK 3.50 3.00 2.50

1) According to the Board of Directors’ proposal

Parent companyFor a specification of the parent company’s equity, see the financial report onpage 41.

Restricted equityRestricted equity may not be reduced through dividends.

Statutory reserveThe purpose of the statutory reserve is to restrict a portion of the net profiteach year of dividend distribution.

Unrestricted equityRetained earningsRetained earnings comprises the previous year’s unrestricted equity after anyallocation to the statutory reserve and after dividend distributions. Togetherwith the profit/loss for the year, it constitutes total unrestricted equity, i.e.the amount available for dividend distribution of the parent company.

Note 29 Untaxed reserves

The parent companyKSEK 2006 2005Cumulative depreciation in excess of plan:Computer systemsOpening balance – 33Depreciation for the year in excess of plan 886 –Sales and disposals – -33Closing balance 886 –

Machinery and equipmentOpening balance – 20Depreciation for the year in excess of plan 14 –Sales and disposals – -20Closing balance 14 –

Allocation reservesAppropriations in conjunction with taxation 2002 8,455 8,455Appropriations in conjunction with taxation 2003 6,919 6,919Appropriations in conjunction with taxation 2005 2,656 2,656Appropriations in conjunction with taxation 2007 10,974 –Closing balance 29,004 18,030

Total untaxed reserves 29,904 18,030

Note 30 Interest-bearing liabilities

This note contains information about the company’s contractual terms inrespect of interest-bearing liabilities. For more information about the company’sexposure to interest rate risk and risks of exchange rate changes, refer tonote 2.

The GroupKSEK 2006 2005Non-current liabilitiesBank loans 46,498 48,734Financial leasing liabilities 53,638 58,621Other interest-bearing liabilities 313 544

100,449 107,899

Current liabilitiesBank overdraft facility 92,992 66,549Short-term element of bank loans 392 505Short-term element of financial leasing liabilities 8,200 11,630Other interest-bearing liabilities – 2,117

101,584 80,801

Terms and repayment period – the GroupFor information about assets pledged, see note 35.

Financial leasing liabilitiesFor information about leasing liabilities, see note 9.

Authorised bank overdraft facilities in the Group total KSEK 110,449 (108,215).Authorised bank overdraft facilities in the parent company total KSEK 55,000(55,000). The parent company’s utilised element of the overdraft facilitytotals KSEK – (–) at the year-end.


NOTES

Note 31 Post-employment benefits, share-based benefits and remunerationto senior executives

Defined benefit pension plansThe Group has four defined benefit plans providing remuneration to employeesafter they retire. In defined benefit plans the payment made to former employeesis based on the salary at retirement and the number of years worked. TheGroup bears the risk for ensuring that the promised payments are made.

KSEK 2006 2005Present value of wholly or partly

funded obligations 3,020 2,450Fair value of managed assets -1,206 -942Net wholly or partly invested obligations 1,814 1,508Present value of unfunded obligations 1,544 1,074Present value of net obligations 3,358 2,582

Unreported actuarial profits (+) and losses (-) -626 -274Net amount in balance sheet

relating to benefit-based plans 2,732 2,308

The net amount KSEK 2,732 (2,308) is reported in the item Pension Provisionsin the balance sheet. Managed assets consists of investments in a mixed fund.

The net amount is per country:KSEKFrance 502 433Norway 1,479 1,234Austria 751 641

2,732 2,308

Changes in the balance sheet on obligations to benefit plansKSEK 2006 2005Obligations to benefit-based plans as per 1 January 1,366 110Remuneration paid out 32 – Current service costs plus interest cost 174 1,282 Currency gains/losses -46 -26Obligations to benefit-based plans

as per 31 December 1,526 1,366

Changes to managed assetsKSEK 2006 2005Managed assets’ fair value 1 January 942 913Contribution from employer 314 318 Expected return on managed assets 26 22 Difference between expected and

actual return (actuarial profit or loss) 6 -385 Currency gains/losses -82 74Fair value of managed assets 31 December 1,206 942

Expense reported to the income statement for defined benefit plansKSEK 2006 2005Current service cost 648 714Past service cost – 411Administration cost 170 148Interest cost 108 90Expected return on managed assets -67 -63Reported actuarial profits (-) and losses (+) 9 255Total expense 868 1,555Cost of defined contribution plans 15,363 17,195Total cost of remuneration after end of employment 16,231 18,750

The expense is reported in the following rows in the income statementKSEK 2006 2005Selling expenses 13,059 15,749Administrative expenses 1,399 1,688Research and development costs 1,088 1,313

15,546 18,750

Assumptions for defined benefit plansThe most significant actuarial assumptions as at the year-end (expressed asweighted averages)

KSEK 2006 2005Discount rate 31 december 3.50% 3.75%Expected return on managed assets 31 december 5.50% 5.50%Future salary increase 2.17% 2.50%Future increase in pensions 1.6% 2.5%Expected remaining service, years 22.8 19.8

Commitments for retirement pensions and family pensions for salariedemployees in Sweden are secured through an insurance policy with Alecta.According to a statement issued by the Swedish Financial AccountingStandards Council’s Emerging Issues Task Force, URA 42, this is a definedbenefit plan involving several employers. For the financial year 2006 thecompany did not have access to information that enabled it to report thisplan as a defined benefit plan. The ITP Pension plan that is secured throughan insurance policy with Alecta is therefore reported as a defined contributionplan. This year’s charges for pension policies arranged with Alecta total KSEK4,421 (5,366). Alecta’s surplus can be distributed to those arranging theinsurance and/or the insured parties. At the end of 2006 Alecta’s surplus inthe form of the collective consolidation level totalled 144 (128.5) percent. Thecollective consolidation level comprises the market value of Alecta’s assetsas a percentage of insurance commitments, calculated according to Alecta’sinsurance calculation assumptions, which do not correspond with IAS 19.

Historical informationKSEK 2006 2005 2004Present value of benefit-based

obligations -4,564 -3,524 -2,142Fair value of managed assets 1,206 942 913Deficit in plan -3,358 -2,582 -1,229

Experience-based adjustments concerning managed assets amounted toKSEK -175 for 2006.

Experience-based adjustments concerning comittments amounted to KSEK -111.

The group estimates that KSEK 327 will be paid out as benefit-based plansduring 2007.

Defined contribution plansIn defined contribution plans the company pays fixed contributions to a separatelegal entity and has no obligation to make any further payments. The Group’sprofit/loss is charged with expenses in line with earnings.

The Group The parent companyKSEK 2006 2005 2006 2005Payments to defined

contribution plans 15,363 17,195 5,245 5,488

››


NOTES

››

Remuneration to senior executivesPrinciplesThe Chairman of the Board and Board members are paid a fee in accordance with the decision of the Annual meeting of shareholders. Employees’ representativesand CEO do not receive a Board fee. Remuneration to the CEO and other senior executives consists of a basic salary, flexible benefits (bonus), pension andcompany car. Remuneration to the CEO also includes an options programme. The other senior executives are the six people who, together with the CEO, constituteGroup management. For the composition of Group management, see page 64. The Board intends to submit proposed Guidelines for Remuneration to seniorexecutives to the 2007 AGM for decision. See next page.

Remuneration and other benefits during the yearBasic salary/ Flexible Other Pension Financial Other

KSEK Board fee benefits benefits expense instruments remuneration TotalThe Chairman of the Board 250 – – – – – 250Other Board members 600 – – – – – 600The CEO (current) 1,401 1,184 – 54 460 – 3,099The CEO (previous) 337 – 22 57 – – 416Other senior executives (6 people) 5,639 745 394 1,488 – 1,290 9,556Total 8,227 1,929 416 1,599 460 1,290 13,921

Comments on the tableOther benefits include company car and allowances. The CEO has a defined benefit pension plan. Other senior executives have defined contribution pensionplans (ITP). The pension expense relates to the expense that affected the profit/loss for the year. For further information about pensions, see below. The Chairman of the Board has not received any remuneration other than the Board fee. Other remuneration concern Alistair Burke who is remunerated through company.

Option schemes Schemes from previous years Schemes from this yearWarrants Employee stock options

2003/2007 Acquisition 2006/2011KSEK Quantity Quantity Value price BenefitThe Chairman of the Board 6,600 – – – –CEO – 75,000 1,380 – 460Other senior executives 1,000 – – – – Total 7,600 75,000 1,380 – 460

Preparation and decision-making processRemuneration to the CEO and deputy CEO for the financial year 2006 wasdecided by the Board, based on a proposal by the Remuneration Committee.Remuneration to other senior executives has been decided by the CEO inconsultation with the Remuneration Committee. For information about thecomposition of and rules of procedure for the Remuneration Committee, see page 62.

Comments on the tableAs at 31 December 2006 senior executives held warrants and employee stockoptions from the 2003 and 2006 schemes.

PensionsThe retirement age for all senior executives is 65.

Severance paymentThere is a mutual period of notice of 6 months in force between HL Displayand the CEO. If the company cancels the CEO’s employment contract, seve-rance pay to the equivalent of 24 monthly salaries will be paid. There is amutual period of notice of 4-6 months in force between the company andother senior executives.

Share-based benefitsHL Display (AB) has on three occasions (2001, 2002 and 2003), via its whollyowned subsidiary HL Financial Services AB, issued debentures with separableoptions (warrants), which were sold to senior executives within the Group.The purpose of offering warrants is to promote long-term commitment to thecompany and to encourage senior executives to become future shareholdersin the company. The term of the warrants is approximately four years, whichthe Board wishes to be acknowledged as an aim to gain warrant holders’long-term commitment to the company’s future. The options have been issuedon commercial terms, defined in accordance with the Black & Scholes model,and the purchase price was paid in cash. Utilisation of subscription rights isnot subject to continued employment. As allocations have been carried outaccording to market conditions and consequently no benefit has been gainedfrom these programmes, no accounting consequences according to IFRS 2have arisen.

In 2006 options programmes from 2001 and 2002 have come due. Nowarrants were used to subscribe to new shares for these programmes. In2006 a new options programme (employee stock options) was issued to theCEO, please see table below. This allocation has occurred without fee. Theentitlement of the CEO to utilise these options is conditional on his continued

employment plus the achievement of certain stated Group goals. Theprogramme has been reported in accordance with IFRS 2. The theoreticalmarket value of allocated employee stock options is valued according to anassessment on the date they were issued in March 2006 and amount to SEK 18.40 per option. The following data has been utilised: share price ofSEK 130.88, strike price SEK 157, anticipated volatility of 29 percent, expected dividend 2.3 percent, duration 5 years and risk-free interest of 3.34 percent. The value of the liability is tested on each closing date and on the date of settlement.

Outstanding warrants as at 31 December 2006 have a redemption price ofSEK 86 and SEK 157 respectively and an average contract term of 3.8 years.

Year implemented 2006 2003 TotaltNumber of outstanding options 75,000 10,900 85,900Proportion of share capital if

fully subscribed 0.97 0.14 1.11Proportion of votes if fully subscribed 0.49 0.07 0.56Subscription price 157 86Subscription period 2009-03-31-- 2005-06-01--

2011-03-31 2007-06-29


NOTES

Guidelines for remuneration to senior management positions(Principal proposal to AGM on 14 March 2007)One important part of HL Display’s strategy is to attract and retain keyemployees. The remuneration offered to holders of senior positions in thecompany forms a vital component of this strategy.

The Board’s opinion is that a fixed salary, combined with a flexible, perfor-mance-related bonus, form an efficient tool with which to attract employeesand guide performance towards goals established by the Board. By offering,in addition, long term part ownership of the company the Board wishes topromote long term commitment which will enable the company to retain itskey employees.

These three components – fixed salary, performance-based bonus and part ownership are to be regarded as a whole; however the three parts areestablished based on different principles.

– The fixed salary will reflect the employee’s area of responsibility and thecomplexity of his/her position. The salary must be competitive as comparedto fixed salaries offered by competitors, or other comparable actors, for equi-valent positions.

– The flexible, performance-based bonus must always be connected to goalswhich are measurable and have been established by the Board. Every yearthe Board will decide on a ceiling amount for this flexible bonus, either as anabsolute amount or as a percentage of the fixed salary.

– Long term part ownership for the employee is designed to encouragehim/her to adopt an approach in harmony with that of the company’s owners.One important principle is therefore that such a programme must containopportunities for the individual to gain benefit from the increased value ofcompany shares, but it must also contain a certain amount of personal riskfor those participating. Another important principle is that the transactionvalues established in such programmes are objectively developed with thehelp of generally accepted methods.

As concerns pension conditions, HL Display will only offer defined contributionpension plans. Neither will the Board approve any employment conditionsthat could give rise to unpredictable future costs for the company.

Note 32 Other provisions

RestructuringDuring the financial year 2006, provision of KSEK 6,558 was made to coverthe estimated costs of closing down the service centre in Bergen op Zoom, theNetherlands. These estimated costs are based on a detailed plan for futurecosts plus a proposal made in negotiations with the landlord of the premises.The decision to restructure the service centre and plans connected to thiswere announced in October 2006. It is anticipated that restructuring will becompleted in the first quarter of 2007.

Note 33 Liabilities to Group and associated companies

As at year-end, the parent company’s liabilities to group companies amountedto KSEK 50,981 (91,594). There were no liabilities to associated companiesor joint ventures.

Note 34 Accrued expenses and prepaid income

The Group The parent companyKSEK 2006 2005 2006 2005Accrued social

security expenses 16,616 17,773 3,337 2,943Accrued holiday pay 24,373 25,413 4,148 4,940Accrued salaries & wages 16,619 13,578 – –Accrued expenses

concerning reorganisation 6,435 – – –

Customer bonuses 10,154 12,665 – –Prepaid income 12,084 8,049 – –Other 19,371 17,278 4,481 2,103Total 105,652 94,756 11,966 9,986

Note 35 Assets pledged and contingent liabilities

A competitor has filed a case against HL Display concerning violation ofpatent. HL Display lost in the lower court and has appealed. Managementassesses that the results of this claim will have no significant effect on theGroup’s financial position.

The Group The parent companyKSEK 2006 2005 2006 2005Assets pledged

for liabilities and provisions

Corporate mortgages 56,490 56,490 – –Shares in subsidiaries 137,855 149,129 40,674 49,826Total assets pledged 194,345 205,619 40,674 49,826

Contingent liabilitiesSecurities for the benefit

of subsidiaries – – 134,349 108,264Guarantees issued for

the benefit of subsidiaries – – 25,209 2,141Securities for the

benefit of joint ventures 2,038 2,462 4,075 4,925Total contingent liabilities 2,038 2,462 163,633 115,330

Note 36 Cash flow statement

Adjustments for items not included in cash flowThe Group The parent company

KSEK 2006 2005 2006 2005Disposals of fixed assets 575 1,841 – –Costs concerning

share-based benefits 460 – – –Pension provisions 424 1,285 – –Changes in provisions 6,558 – – –Translation difference -424 915 – –Provision for reorganisation 6,435 – – –Other provisions 1,044 – 1,044 –

15,072 4,041 1,044 –

InvestmentsThe Group The parent company

KSEK 2006 2005 2006 2005Investments made to

retain the capacity level 21,896 27,772 4,629 1,324Investments that have

increased the business’s capacity level 10,345 13,507 – –

Total investments 32,241 41,279 4,629 1,324


NOTES

The income statement and the balance sheet will be submitted for adoption at the Annual meeting of shareholders on 14-03-2007. Stockholm, 2 February 2007

Anders RemiusChairman

Åke Modig Lis Remius Jan-Ove Hallgren Kent Mossberg Magnus Jonsson Stig Karlsson

Gérard DubuyCEO

Our auditor’s report was submitted on 2 Februari 2007.

KPMG Bohlins AB

Bo Ribers Åsa Wirén LinderAuthorised Public Accountant Authorised Public Accountant

Note 37 Related party transactions

Related parties Chairman of the Board Anders Remius and Deputy CEO Kent Hertzell own,indirectly, shares in XLENT Consulting AB. In 2006 XLENT Consulting AB invoiced Group companies KSEK 18,386 (13,866). The invoices concernwork carried out on management, development and support of the Group's IT network and ERP system. The Group’s debt to XLENT Consulting AB totalsKSEK 5,376 (466).

Of the parent company’s revenue, KSEK 84,129 (60,542) relates to consultancy services sold to Group companies.

Transactions with key people in a managerial positionThe company’s Board members and their immediate family members control81 (81) percent of votes in the company. There are no loans to Boardmembers. For further information, see note 31 Post-employment benefits,share-based benefits and remuneration to senior executives.

Note 38 Fees to auditors

The Group The parent companyKSEK 2006 2005 2006 2005KPMGAudit fees 2,165 1,577 200 142Other fees 607 577 398 328Other auditorsAudit fees 160 164 – –Other fees – – – –

Audit fees relate to the audit of the annual accounts and bookkeeping as wellas the Board’s and the CEO’s administration, other tasks that are the duty ofthe company’s auditor as well as advice or other activities arising from obser-vations during such an audit or the performance of such other tasks. Anythingelse falls under ‘other fees’.

Note 39 Events after the balance sheet date

During January the Finnish company Display Team Oy was acquired. Thecompany manufactures and markets shelf merchandising solutions. For thefinancial year ended February 2006, Display Team's net sales amounted toMSEK 50 and the operating profit amounted to MSEK 4.5. For the financialyear ending February 2007 a net sales growth exceeding 10 percent is expected.The acquisition is expected to have a marginal positive effect on earnings pershare for the HL Display Group 2007.

The financial statements were approved for issuing by the Board of theparent company on 2 February 2007.

Note 40 Critical estimates and evaluations

Company management has discussed with the Audit committe developments,the selection of and information in respect of the Group’s critical accountingprinciples and estimates, as well as the application of these principles andestimates.

Critical evaluations in the application of the Group’s accounting principlesCertain critical accounting estimates made in applying the Group’s accountingprinciples are described below.

Translation of foreign currency financial statementsCompared to the case in most other group’s, all HL Display’s subsidiaries are considered to have the same functional currency as the parent companysince they are all very closely linked to the parent company. However, ongoingreporting in the foreign units may not be performed in the functional currencydue to legislation in each country. There is therefore a translation of eachsubsidiary’s financial statements into the functional currency (SEK) by meansof translating monetary assets and liabilities in foreign currency into thereporting currency at the exchange rate prevailing at the year-end. Incomeand expenses excluding depreciation in a foreign business are converted intoSwedish kronor at an average exchange rate representing an approximationof the exchange rates on each transaction date. Depreciation charges areconverted at the exchange rate on the acquisition date for each asset. Thecost of goods sold is converted at the average exchange rate, as the turnoverrate is high. The translation difference arising when converting currencies offoreign businesses appears in the income statement under financial items.

Exposure to foreign currenciesChanges in exchange rates can have a relatively major effect on the companyas a whole. Note 2 contains a detailed analysis of the exposure to foreigncurrencies and the risks related to changes in exchange rates.

Note 41 Details of the parent company

HL Display AB is a Swedish-registered limited liability company with its regis-tered office in Stockholm, corporate registration number 556286-9957. Theparent company’s shares are quoted on the OMX Nordic Exchange’s SmallCap list. The address of head office is Horisontvägen 26, 128 34 Skarpnäck,Sweden. The consolidated financial statements for 2006 comprise the parentcompany and its subsidiaries, together referred to as the Group. The Groupalso includes owned holdings in associated companies and joint ventures.


AUDIT REPORT

Audit report

To the annual meeting of the shareholders of HL Display AB (publ).Corporate identity number 556286-9957

We have audited the annual accounts, the consolidated accounts, theaccounting records and the administration of the board of directorsand the managing director of HL Display AB (publ) for the year 2006.The annual accounts and the consolidated accounts are presentedin the printed version of this document on pages 34-60. The boardof directors and the managing director are responsible for theseaccounts and the administration of the company as well as for theapplication of the Annual Accounts Act when preparing the annualaccounts and the application of International Financial ReportingStandards IFRSs as adopted by the EU and the Annual Accounts Act when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidatedaccounts and the administration based on our audit.

We conducted our audit in accordance with generally acceptedauditing standards in Sweden. Those standards require that we planand perform the audit to obtain high but not absolute assurance thatthe annual accounts and the consolidated accounts are free ofmaterial misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the accounts.An audit also includes assessing the accounting principles used andtheir application by the board of directors and the managing directorand significant estimates made by the board of directors and themanaging director when preparing the annual accounts and theconsolidated accounts as well as evaluating the overall presentationof information in the annual accounts and the consolidated accounts.As a basis for our opinion concerning discharge from liability, we

examined significant decisions, actions taken and circumstances ofthe company in order to be able to determine the liability, if any, tothe company of any board member or the managing director. We alsoexamined whether any board member or the managing director has,in any other way, acted in contravention of the Companies Act, theAnnual Accounts Act or the Articles of Association. We believe thatour audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with theAnnual Accounts Act and give a true and fair view of the company’sfinancial position and results of operations in accordance with generally accepted accounting principles in Sweden. The consolidatedaccounts have been prepared in accordance with InternationalFinancial Reporting Standards IFRS as adopted by the EU and theAnnual Accounts Act and give a true and fair view of the group’sfinancial position and results of operations. The statutory administra-tion report is consistent with the other parts of the annual accountsand the consolidated accounts.

We recommend to the annual meeting of shareholders that theincome statements and balance sheets of the parent company andthe group be adopted, that the profit of the parent company be dealtwith in accordance with the proposal in the administration reportand that the members of the board of directors and the managingdirector be discharged from liability for the financial year.

Stockholm February 2, 2007KPMG Bohlins AB

Bo Ribers Åsa Wirén LinderAuthorized Public Accountant Authorized Public Accountant


THE BOARD’S WORKING PRACTICES

HL Display’s Board of Directors consists of six members elected bythe Annual General Meeting of shareholders, as well as two membersand one deputy elected by the employees. The chairman of the Boardis elected by the Annual General Meeting of shareholders. At theAnnual General Meeting on 14 March, 2006, Anders Remius waselected Chairman of the Board to succeed Åke Wester.

Members of the Board include people who have an associationwith HL Display’s major shareholders, and also people who are inde-pendent of the owners. As a rule the Board meets six times a year,with additional meetings as required. The Board held ten Boardmeetings during the financial year 2006. The dates of Board meetingsare confirmed in connection with the inaugural Board meeting.Certain Board meetings coincide with the dates for financial infor-mation. These are the quarterly, half-yearly and year-end accounts.The Board’s work follows an annual presentation plan with specialtopics and fixed decision-making points.

A normal agenda for a Board meeting contains:– Review of the minutes of the previous meeting– The CEO’s report on operations– Finance– Any other business

The secretary of the Board is the Group’s Deputy CEO, Kent Hertzell.

Attendance at the Board’s meetings Attendance/Number of meetingsÅke Wester, Chairman of the Board 1) 4/10Anders Remius 2) 10/10Gérard Dubuy 3) 6/10Lis Remius, member of the Board 10/10Arne Karlsson, member of the Board1) 4/10Stig Karlsson, member of the Board 10/10Stefan Elving, member of the Board1) 4/10Åke Modig, member of the Board4) 6/10Jan-Ove Hallgren, member of the Board4) 6/10Magnus Jonsson, employee representative 2/10Kent Mossberg, employee representative 9/10Henrik Smedlund, employee representative 5/10

1) Until March 142) CEO until March 14, then Chairman of the Board3) CEO and member of the Board since March 14

Rules of procedureThe Board’s work is regulated by a set of specially drawn up rules ofprocedure. Put briefly, the rules of procedure mean that the Board ofDirectors is responsible for the company’s organisation and admi-nistration of the company’s affairs. The Board must make sure thatthe company’s organisation is structured so that bookkeeping, fundmanagement and the company’s financial situation in general is mana-ged in a secure way. The Board must on an ongoing basis monitorthe company’s and the Group’s financial situation, which is reportedmonthly, so that the Board can perform its duty of evaluation pursu-ant to the law, listing rules and best practice for Boards of Directors.

Generally the Board deals with matters of significant importance for the Group, such as:– Strategic plans– Marketing plans– Product planning

– Acquisitions and divestments of companies or businesses– Purchases and sales of other significant assets

Important matters during 2006

– Investment matters– Organisational matters– Follow-up on cost control and investments– Review of long-term objectives – Measures for increased profitability

InstructionsThe Board has issued special instructions on the responsibilitiesand authority of the CEO of HL Display. The Board has also drawnup special reporting instructions for the management.

Evaluation of the Board’s workThe Board has, during 2006, implemented a new method for evaluating the Board’s work. Evaluation is based on an anonymoussurvey among the Board members, which deals with issues such asthe Board’s composition, working procedures and responsibilities.The survey is put together and evaluated by an external party.

FeeThe total fee to the Board of HL Display in 2006 totalled SEK850,000, of which the chairman of the Board received SEK250,000. SEK 100,000 remains, which may be used to cover coststhat may arise for committee work. No remuneration was paid otherthan that decided by the Annual General Meeting of shareholders.

CommitteesThe Board has appointed a Remuneration Committee and an AuditCommittee. The Election Committee has been appointed and presen-ted in accordance with the decision by the Annual General Meeting.

The task of the Election Committee is to suggest to the AnnualGeneral Meeting Board members and the fees for the Board andAuditors, in close collaboration with the major shareholders. TheElection Committee consists of Anders Remius, Chairman of HL Display AB, Johan Lannebo, Fund Manager at Lannebo fonderand Eva Roth, Controller at Ericsson. The Election Committee hasmet once.

In 2006 the Remuneration Committee has consisted of the Chairmanof the Board Anders Remius plus Board member Jan-Ove Hallgren.

The Committee deals with issues concerning remuneration toCEO and Deputy CEO. Decisions, however, are taken by the Boardafter proposals from the Remuneration Committee. Decisionsconcerning remuneration to other senior executives are taken bythe CEO after consultation with the Remuneration Committee.

The Remuneration Committee also submits recommendations tothe Board on how the Remuneration Guidelines for senior executives,adopted by the AGM, are to be applied in practice.

It is the responsibility of the Remuneration Committee to monitorthe development of remuneration levels applied by competitors andother comparable actors in order to ensure that the HL Display’s offersare competitive. The Remuneration Committee met once during 2006.

It is the Audit Committee’s task to prepare the election of Auditorsand conduct a dialogue with the auditors about the audit. The AuditCommittee consists of the members of the Board, excluding the CEO.The Audit Committee met once during 2006. KPMG were elected forfour years at the Annual General Meeting of shareholders in 2004.

Proposals from individual shareholders can be made to thecommittees by post via HL Display’s head office in Skarpnäck, or bye-mail to [email protected].

Work of the Board ofDirectors during 2006

4) Since March 14


BOARD OF DIRECTORS

Board of Directors ‹‹ Anders RemiusBorn: 1947.Chairman of the Board.Chairman of the Board since 2006,member of the Board since 1982.Education: Financial qualification.Holding: 873,354 shares, of which401,904 class A shares. Throughcompany 74,950 class B shares.6,600 warrants.

Lis Remius ››Born: 1945.Member of the Board since 2004(member 1982-2001).Education: Sales and marketingqualification.Holding: 873,252 shares, of which401,904 class A shares. Throughcompany 74,950 class B shares.

Gérard Dubuy ››Born: 1961.CEO of HL Display AB.Member of the Board since 2006.Education: Master of Science inEconomics and BusinessAdministration.Holding: 3,300 shares, 75,000employee stock options.

‹‹ Åke ModigBorn: 1945.Member of the Board since 2006.Education: Master of ScienceStockholm School of Economics,Harvard Business School (ISMP).Other appointments: Member ofthe Board in Spendrups BryggeriAB and Findus AB. Chairman of the Board in Engelhardt & Co. and ColoPlus.Holding: 0 shares.

‹‹ Kent MossbergBorn: 1957.Employee representative.Member of the Board since 1995.Position: Property Manager.Education: Engineering qualification.Holding: 1,330 shares.

Deputy member

‹‹ Henrik SmedlundBorn: 1976.Employee representative.Position: Machine operator.Education: Financial qualification.Holding: 0 shares.

Stig Karlsson ››Born: 1952.Member of the Board since 2001.Position: Investment Manager,Ratos AB. Education: Master ofScience in Economics and Business administration. Other appointments: Chairman ofthe Board in Haendig AB and HaglöfsAB. Member of the Board in DIABAB, Gadelius K.K., Hägglund DrivesAB, Lagerstedt & Krantz AB andLindab AB. Holding: 0 shares.

Magnus Jonsson ››Born: 1969.Employee representative.Member of the Board since 1998.Position: Machine operator.Education: Structural Engineeringqualification.Holding: 0 shares.

‹‹ Jan-Ove HallgrenBorn: 1943.Member of the Board since 2006.Education: Secondary SchoolCertificate in Commercial Subjects,Officer in the regular army for 9years. Positions with the ICA Group1971-2000. Chairman of the Boardin Swede Horse AB, chairman of theSwedish Equestrian Federation'sCompetition Committee and memberof the Federation's Board.Holding: 4,000 shares.


SENIOR EXECUTIVES

Senior Executives ‹‹ Gérard DubuyCEO.Born: 1961.Employed since: 1995.Education: Master of Science in Economics and Business administration.Holding: 3,300 shares, 75,000 employee stock options.

Kenneth Löfgren ››IT Director.Born: 1960.Employed since: 1993.Education: Diploma in Marketing,Engineering qualification.Holding: 500 shares, 1,000 warrants.

‹‹ Håkan ErikssonSales and Marketing Director.Born: 1966.Employed since: 1992.Education: Master of Science in Industrial Engineering and Management.Holding: 200 shares.

Birger Nilsson ››Research and DevelopmentDirector.Born: 1961.Employed since: 1999.Education: Master of Science in Economics and Business administration.Holding: 3,300 shares.

Kent Hertzell ››Deputy CEO, Financial Director and Production Director.Born: 1950.Employed since: 1995.Education: Engineering qualification,Master of Science in Economicsand Business administration,Master in Science in Management from MIT.Holding: 4,000 shares.

‹‹ Alistair BurkeBusiness Development Director.Born: 1952.Consultant.Education: B.A (Hons.).Holding: 0 shares.

Staffan Forslund ››Human Resources Director.Born: 1949.Employed since: 2000.Education: Bachelor of Science.Holding: 0 shares.

Åsa Wirén LinderBorn: 1968Authorised Public Accountant,KPMG Other assignments: Elected Auditor for Tilgin. Auditor for Hufvudstaden andTradeDoubler.

AuditorsKPMG Bohlins ABAuditors since 2004.

Bo RibersBorn: 1942Authorised Public Accountant,KPMG.Other assignments: Elected Auditor for Hufvudstaden, LE Lundbergföretagen and Ångpanneföreningen.


HISTORY

History

HL Display’s history started in Borlänge,Sweden, in 1954 by Harry Lundvall. His firstproduct for shops was a plate stand madeof shaped metal wire. In due course, by hot-bending plastic he also produced an itemfor displaying the price next to the product.

In 1969 Harry’s son Åke Westberg took overthe business, which was at the time turningover about SEK two million and had fiveemployees. In 1975 Åke Westberg obtaineda patent for the shelf edge strip that he haddeveloped. The HL Datastrip is the productfor which HL Display is still best known, andit remains an important part of the productrange. The patent was the breakthrough forHL Display. The largest Swedish retail chainsrecognised the benefits of Åke’s solution,and they soon became major customers.

HL Display has acquired a number of smallercompanies, which have strengthened theproduct range or added expertise within aspecific field of production technology.

In 1993 HL Display was listed on theStockholm Stock Exchange.

In 1996 a partnership was set up with TrionIndustries as a means of entry into theAmerican market. International expansioncontinued in line with the rapid growth of theretail trade. Between the mid-1990s and1999 sales companies were established inPoland, Austria, the Czech Republic, Latvia,Russia and Turkey.

In 2000 and 2001 the number of salescompanies in Eastern Europe was augmen-ted with new ones in Ukraine, Slovenia andSlovakia. During 2000 HL Display alsobegan to look further to the east, towardsSoutheast Asia. Many of the company’scustomers, such as Carrefour, already hada presence in several major Asian markets.It was therefore natural for HL Display to haveits own presence in these markets. The firstAsian company was launched in 2000 inSingapore, and it now serves as the hub ofHL Display’s activities in the region.

In 2002 and 2003 expansion continuedapace in Asia, with new companies beingestablished in Hong Kong, Malaysia,Taiwan, Thailand and China.

In 2005 production started up at HL Display’s factory in China, situated inSuzhou, to the northwest of Shanghai.Local production is a very important step to increase competitiveness in the region.In 2005, HL Display was awarded the titlePublic Company of the year by the financialnewspaper Dagens Industri and theSwedish Shareholders’ Association.

At the 2006 Annual General Meeting AndersRemius was succeeded by Gèrard Dubuy as CEO of HL Display. Anders Remius’commitment to the company continues,now as the Chairman of the Board.

HL Display’s global merchandising solutions make

life easier for staff in the stores at the same time as

products are displayed in the best possible way.

In 1977 Åke Westberg’s daughter Lis Remiusand her husband Anders Remius started asales company that mainly sold productsfrom HL Display’s product range.

In 1986 Lis and Anders Remius bought HL Display from the investment companyParcon, which had acquired the companyfrom Åke Westberg in 1982. They recogniseda potential in HL Display that they wantedto develop themselves, including theestablishment of sales companies in other countries.

International expansion began in 1987.Sales abroad had previously been channelledthrough direct sales and distributors, but nowHL Display set up its own sales companiesin Belgium and the UK. Sales companieswere then set up in Germany in 1989, andin Norway and France in 1990.

At the turn of the year 92/93 the companycompleted its first company acquisition, withthe purchase of Jegab Display. Since then


FINANCIAL INFORMATION

Financial Information

HL Display will publish financial information on the followingdates during 2007:

Monthly Report 1 month 2007 14-02-2007Annual Report 2006 week 8Monthly Report 2 month 2007 14-03-2007Annual General Meeting 14-03-2007Interim Report 3 month 2007 17-04-2007Monthly Report 4 month 2007 15-05-2007Monthly Report 5 month 2007 15-06-2007Interim Report 6 month 2007 13-07-2007Monthly Report 7 month 2007 14-08-2007Monthly Report 8 month 2007 14-09-2007Interim Report 9 month 2007 12-10-2007Monthly Report 10 month 2007 14-11-2007Monthly Report 11 month 2007 14-12-2007

www.hl-display.comAll relevant financial information about HL Display is available onthe company’s website, www.hl-display.com, under the “Investors”tab. The website also provides a comprehensive overview of thecompany.

Monthly and interim reports are available in Swedish and in English.The website also includes an archive of monthly and interim reportsdating back to 1997 and an archive of annual reports dating backto 1996. Financial information can be ordered by using the orderform available on the website. It is also possible to subscribe toinformation from the company.

Distribution of Annual and Interim ReportsHL Display prints and distributes the Annual Report and the InterimReport for January-June. These are distributed to all shareholders.

Produced by IR Stockholm och HL DisplayDesign: John BlomqvistPhotography: Magnus FondPrinting: Wassberg+Skotte Tryckeri

HL DISPLAY AB • HORISONTVÄGEN 26 • 128 34 SKARPNÄCK • SWEDEN • TEL +46 8 683 73 00 • FAX +46 8 683 73 01www.hl-display.com

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