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2001annual eng

Axis AB | Annual Report 2001

Content

Presidents' comments

Axis' business and direction

Market segments

Product areas

Video

Scan and Store

Access

Research and development

Human resources

Risk management

Six-year review

Definitions

Pro forma accounts

Financial review 2001

Board of Directors' report

Income statements

Balance sheets

Cash flow statements

Notes

Audit report

Board of Directors and Auditors

Group management

The Axis share

Glossary

Addresses

Financial information

Invitation to Annual General Meeting

Axis in brief

Axis develops solutions for user-friendly and secure communication over wired and wireless networks. The company is a worldwide market leader in network connectivity, with products for the office, facility and industrial environments.
Axis was founded in 1984 and is listed on the O-list (Attract 40) of Stockholmsbörsen (XSSE:AXIS). With more than 300 employees, and offices in 14 countries, Axis operates globally in cooperation with distributors and OEM partners in some 70 countries. Markets outside Sweden account for more than 95 percent of sales.

Key ratios
SEK M Group excl. Netch2 Net sales Operating loss Loss after financial items

12 mos 2001
675.9 83.3 117.8

Pro forma 12 mos 20001
641.5 176.5 154.3

Group total

Net sales Operating loss Loss after financial items

696.3 113.8 149.5

707.7 239.5 219.7

Cash flow Liquid funds on closing date

15.2 180.8

196.0

1 The abbreviated fiscal year encompasses the period May 1 December 31, 2000. Full-year figures are reported pro forma.

2 Axis implemented restructuring measures during the second quarter of 2001, including divestment of its 59 percent holding in Netch Technologies.

The year in brief
· Operating profit during latter half of the year · Positive operating cash flow during latter half of the year · Sales increase of 5 percent · Several important strategic partnerships · Divestment of loss-incurring operations

NET SALES (EXCL. NETCH) SEK M 800 700 600 500 400 300 200 100 0 96/97 97/98 98/99 99/00 00* 01
Group's sales for comparable units increased during 2001 by slightly more than 5 percent.
*Full-year pro forma.

SEK M 50

OPERATING LOSS/PROFIT / EBIT (EXCL. NETCH)

100

150

200 96/97 97/98 98/99 99/00 00* 01

Structural costs
The operating result in 2001 amounted to a loss of SEK 83 M, but an operating profit of SEK 8 M was achieved during the second half of the year. This corresponds to an operating margin of 2.5 percent.
*Full-year pro forma.

SALES BY BUSINESS AREA 2001 (EXCL. NETCH)

Other 3%
Office Connectivity, OEM 18%

Networked Office 43%

Camera 36%

Camera continues to be the fastest growing area of operations. OEM has also developed favorably during the year.

SALES BY REGION 2001 (EXCL. NETCH)

Asia 23%

EMEA 1) 46%

Americas 2) 31%

1) Europe, Middle East, Africa 2) North, South and Central America
All Axis markets showed increased sales during 2001.

President's comments
Our goal for 2001 was to achieve profitability step-by-step after having implemented the largest phase of change in Axis' history to date. The goal was achieved according to plan, and Axis reported an operating profit during the second half of 2001. Investments during the year and structural changes resulted in Axis being able to maintain profitability while at the same time advancing its positions in a depressed market.
Profitability

Profitability achieved according to plan Business during the year was shaped by the goal of achieving profitability step-by-step. Strategically, this was the correct priority for 2001 since both the company's customers and the financial markets were negatively affected by the prevailing recession. As anticipated, losses were noted in the beginning of the year, but an operating profit of SEK 8 M was reported for the second half of the year. This corresponded to an operating margin of 2.5 percent. There were four main factors contributing to profitability:
Increased sales Sales, excluding Netch Technologies AB, increased by 5.3 percent to SEK 676 M (642). Because 95 percent of Axis' sales are exported, the weakening of the Swedish currency had a favorable impact on sales. Sales growth was noted in all geographic markets. Despite weak economic conditions, the company was generally able to advance its positions in the various product areas, including fast-growing and more mature products.

Restructuring measures During 2001, the 59 percent holding in Netch Technologies AB was sold. The negative effect on earnings from Netch Technologies during the first half of the year amounted to SEK 31 M. When further financing requirements arose, Axis elected to sell its holding, which also was no longer regarded as strategic.
In addition, the Mobile Access Server product was sold during the year to the product area's management. The business model for this product is based on system sales to telecom operators, which diverges from Axis' core business. The sale results in reduced development costs, but does not affect Axis' continued investments in access points or other wireless network products based on unlicensed radio technologies.
A cost-savings program was implemented during the second quarter of 2001 which included personnel reductions of about 15 percent.
Through the cost-savings program and structural measures, operating costs were reduced by more than SEK 100 M on a full-year basis. The reduction achieved full effect from the third quarter onward.

Improved gross margins Because a large portion of Axis' production was moved to sub-suppliers in Asia during the second half of the year, gross margins improved. The gross margin was 56.3 percent during the second half of the year, compared with 50.6 percent during the first half, an improvement of 5.7 percentage points. This improved earnings by SEK 20 M during the second half of the year.

Financial position Achieving profitability and continuous efforts to reduced tiedup capital strengthened cash flow. Operating cash flow was negative for the full year 2001, but due to the improvement in earnings, cash flow from current operations was positive in an amount of SEK 19 M during the final six months. With liquid funds of SEK 181 M and unutilized credit facilities corresponding to an additional SEK 85 M, Axis had at its disposal funds totaling SEK 266 M on December 31, 2001.

despite downturn

Favorable prospects for continued growth Business development, as well as work with the strategic agenda, was successful during the year. Axis is active in a market driven by innovation in which our ability to maintain a position of technical leadership is important for future sales. Axis therefore continued to pursue an intensive development program in which slightly more than one fifth of total sales were reinvested in research and development during the year. In combination with the company's financial strength, this creates excellent prospects for advancing Axis' positions and achieving profitable growth.
Increased market orientation During the year, we continued to work in accordance with a more market-oriented approach with favorable results. Operations were reorganized during the fourth quarter of 2001 to increase the efficiency of our efforts to achieve continued growth. As 2002 begins, there is a clear division of our markets in three segments: · Networked Office · Networked Facility · OEM

ment, Axis works with major equipment manufacturers to offer technology for a broad product portfolio, which facilitates long-term and mutually profitable relations.
Axis 2002 The strategic investments in technical, product and market development intended to strengthen the company's position and enable growth continue according to plan. Our goal during the year is to continue develop in a profitable manner. At the same time, sales growth is expected to be weak during the first six months due to uncertain economic conditions. Further weakening of the Japanese economy toward the end of 2001 affects sales growth for Axis' own products, as well as OEM products. Nonetheless, we retain our forecast of an operating profit for the full-year 2002.
In closing, I would like to extend my thanks to all employees for a successful year that was difficult in many ways, but also eventful.
Lund, March 2002

The previous division-based organization was thus replaced by a functional organization that takes this segmentation as its starting point, leveraging significant synergies in technical and product development, as well as marketing and sales. The two segments Networked Office and Networked Facility, in which Axis sells products under its own brand, are covered by our global network of distributors. In the OEM seg-

Peter Ragnarsson President and CEO

Axis' business and direction
In the future, everything can communicate over intelligent networks. Axis will be a driving force.

Axis' business

Axis was founded in 1984 and is a leader in the development and marketing of user-friendly and secure communications over wired and wireless networks. The company's product portfolio includes print-, video- and scanner servers. Operations comprise of technology development, product development, marketing and sales. Manufacturing is conducted by subcontractors with final assembly and distribution being managed by Axis. Axis provides customers with added value by facilitating improved efficiency in administration, reduced operating costs and broadened fields of use for various types of network equipment.
The trend is moving rapidly towards a society increasingly encompassed by integrated networks. To date, this has primarily involved office and administrative functions of companies and organizations where computer networks are employed to enhance efficiency. The tendency for further operations to be included in IP-based networks is extremely evident. Today's networks are also being developed to support increasingly intelligent units. In line with this development, and in connection with an increase in the different types of equipment and units being connected, the intelligence of the networks is increasing and new possibilities are being created.

Business concept Axis' business concept is to fulfill the need for efficient, user-friendly and secure network communications. Axis' flexible solutions, which are independent of both PCs and servers, are made possible by directly connected units with built-in intelligence. Based on its IP-based technology platform, developed in-house, Axis is able to rapidly adapt its offering to the market with new applications, thus broadening its product area in a cost-efficient manner.
A global market Axis is represented globally through its own offices in 14 countries and through its collaboration with distributors and OEM partners in some 70 countries worldwide. More than 95 percent of production is exported to more than 70 countries, providing a favorable spread of risk. Slightly more than half of sales are made to countries in the EMEA region. The Americas correspond to approximately 30 percent of sales and Asia for about 20 percent.
Customer structure The end-users of Axis' products are mostly medium- and large-sized companies. These companies use the products in offices and such environments as facilities, warehouses, production plants and stores.

11984 IBM protocol conversion Europe

2 1992 Print servers Local networks Asia

3 1996 ThinServer Storage US

4 1998 Camera and video products Wireless equipment Globally

Since Axis was founded in 1984, it has conducted four large-scale and comprehensive phases of investment and development. Operations have been broadened in parallel with the development of the technological foundation. Thus, in each phase, new products and markets have been added.

and direction

Another large and important customer group consists of public institutions such as authorities, national agencies, ministries and the healthcare and education sectors. In these areas, Axis' products can be used to increase security and efficiency by employing cameras connected to networks and video servers. At the same time, ownership and maintenance costs associated with, for example, printers, can be reduced and administration made more efficient with the help of solutions for electronic document management.
For OEM customers, Axis offers custom-tailored network solutions within several product areas. OEM customers consist mostly of global manufacturers of printers and copiers as well as companies that develop and sell video or security equipment.
In addition to products traditionally connected to networks in one way or another, such as printers, there is currently extensive interest in new types of network products. Examples include network cameras used in security systems as well as with industrial equipment. There is also interest in telematic products; that is, devices used for remote communication with machines, cars, boats and other equipment.
New, market-oriented organization The foundation of Axis' operations is an extensive technical expertise and broad experience in the development of IPbased network solutions. Axis' markets develop and change rapidly. To optimize the company for continued expansion within existing product areas, operations were reorganized in 2001 according to a market-oriented view.
The former divisional-based organization has been replaced by a functional organization based on a logical and

clear segmentation of the market. This brings synergies not only in the development of technologies and products, but also in marketing and sales.
To effectively coordinate sales in the area of technology, the earlier OEM and technology divisions have been gathered within the OEM market segment.
A further change is that the Mobile Internet division no longer has an independent role. Wireless communications are instead integrated as a natural component of the three market segments. The increased interest in wireless network connectivity is favored by emerging standardization in the form of such technologies as WLAN (IEEE 802.11) and BluetoothTM. Axis holds a leading position within products and technologies for wireless network connectivity, an advantage that can be utilized in all product areas.
Axis currently operates within three market segments: Networked Office and Networked Facility, where Axis sells products under its own brand, and the OEM segment where sales of equipment or technology licensing are made to other manufacturers. Axis offers several product families to the various market segments to meet customers' needs.

The Bluetooth trademarks are owned by Bluetooth SIG, Inc.

Axis' business and direction

Business model

AXIS
Products under Axis' own brand

Product sales/ technology licensing

Volume distributor

Value-added distributor

OEM

Reseller

CUSTOMERS/END USERS

Distributors: Ingram Micro, Softbank, Tech Data, Azlan etc.

OEM: Canon, Fuji Xerox, Sharp, QMS/Minolta, Sony etc.

Business model To maximize the benefit obtained from development efforts, Axis employs a business model that is divided into two parts: 1) sales of products, solutions and technology under Axis' own brand via indirect sales channels to companies and organizations, and 2) product sales or technology licensing to other manufacturers OEMs (Original Equipment Manufacturers) who, in turn, sell total solutions under their own brands.
Channel marketing is conducted by local subsidiaries around the world, which bear the entire responsibility for their customers, regardless of the product concerned. Axis is thereby able to benefit from the fact that customers, who may be distributors, end-users or OEMs, are often interested in several products from Axis range.
Axis' extensive international experience and its global distribution network are among its most important success factors. Thanks to a strong local presence, that is focused on distribution and sales, Axis is able to bring new products rapidly to all of its markets worldwide.
Strategies Axis shall strengthen and develop its position as a marketleading supplier of solutions and equipment for IP-based net-

work connectivity. The company currently holds leading positions within all product areas and its brand is well established within solutions for connecting units such as printers, scanners, cameras and storage media to networks. Axis also holds a strong position as an OEM supplier of network technology to leading equipment manufacturers.
The strategy for continued growth with profitability is summarized in the following points:
Securing a strong financial position The aspiration to improve profits and increase sales permeates Axis' operations. A favorable financial position provides increased freedom of action and greater choice.
Developing positions in selected market segments Through active processing of markets and a sensitive ear to customers' needs and technological developments, Axis is able to continue to expand and build strong positions in its selected market segments. The successes with camera and video products and within the area of OEM operations represent positive examples of how Axis has developed its positions within its market segments.

Maintaining our leading position in technology Axis shall continue its efforts of being early on the market with new technologies and new products. Through continued innovation and development of easy-to-use, efficient and secure solutions for customers' varying needs regardless of network environment Axis shall strengthen its position as a leading supplier of userfriendly solutions for network connectivity.
Becoming the employer of choice in the industry Being a knowledge-based enterprise, employees represent a strategically important resource for Axis' future growth. By means of a clear focus on a strong corporate culture, room for individual development, flexibility and open communication, Axis is an organization optimized to achieve new business targets.
Goals During 2002, Axis plans to further strengthen its position by focusing on growth with profitability. The company has a strong market foundation and a favorable balance between established markets and growth markets.
For 2002, increased profits and growth figures represent expressed targets. Increased profitability is to be achieved through continued penetration of existing product areas within Networked Office and continued development of the potential in the rapidly expanding Networked Facility market segment. The demand for camera and video equipment are strong driving forces in the Neworked Facility segment.
Within the OEM market segment, existing areas of technology represent the primary growth potential for 2002.
The purpose of the reorganization carried out during the latter part of 2001 was to increase efficiency in operations, improve profitability and increase productivity. The changes are expected to begin providing results during 2002.
The long-term growth target for Axis during the period up to and including 2005 is an annual average increase in sales of 30 percent and the achievement of a margin before taxes of 10 to 15 percent during 2003 at the latest.

Environmental policy As far as possible, Axis is to minimize the impact of its operations and products on the environment. With this purpose, the company employs a comprehensive environmental policy.
Axis works with preventative environmental measures designed to provide continual improvements in the entire life cycle of its products. Regard for the environment is to be a self-evident and integrated element of each new project. This includes making efforts to have an active dialog with contract manufacturers and sales channels on products, packaging and logistics with the purpose of encouraging suppliers to meet Axis' requirements. The economical use of resources is an important factor in the processes employed in the purchasing of office machinery and computers.
Axis has the expressed ambition of making its manufacturing processes as kind to the environment as possible. The company endeavors to minimize waste and to recycle paper and other materials to the greatest extent possible.

Market segments
Axis currently operates within three clearly-defined market segments: Networked Office and Networked Facility, within which Axis sells products under its own brand, and OEM, which involves sales of equipment and technology licensing to other manufacturers. In order to meet customers' various requirements, Axis offers several product families to the different market segments.
Three strong market segments

Product areas

TECHNOLOGY AND PRODUCT DEVELOPMENT

Video Print Scan Store Access

Market segments NETWORKED OFFICE NETWORKED FACILITY OEM

CUSTOMERS

Networked Office
The Networked Office market segment comprises networks in office environments, involving primarily network connection of printers, scanners and storage media, and to an increasing degree, network cameras. Much of Axis' origins lie in solutions for office environments, and the company has, thus, a well-established position within this segment. There is, however, favorable potential for development for both existing and new offerings. Axis' focus is on products and solutions primarily to companies and organizations with more than 50 employees.
The market within Networked Office is rather diversified. Due to extensive regional differences, increasing demand is generated by factors that vary around the world. One general impetus, however, is the move from file servers to printers connected to PCs or directly connected network printers, as well as significantly faster connection speeds resulting from upgrades from 10 Mbit to 100 Mbit network connections.
Several important agreements have been signed during the year. Axis has also worked to reinforce it distribution network and has, during 2001, signed further distribution agreements with companies including Ingram Micro, Azlan and EET Nordic in new geographic markets.

Networked Facility
With launches of products such as network cameras and video servers, Axis has begun to work with networks in environments other than traditional offices. In the rapidly expanding Networked Facility market segment, which comprises networks in, for example, facilities, production plants, warehouses and public environments, Axis has established itself as a leading player at an early stage.
Networked Facility is a young market segment, judged to have extensive future potential for Axis, focusing in the shortterm perspective on video solutions. In a longer-term perspective, product areas will be extended to include other equipment used in such environments. The factor driving the market most strongly in the short-term is an increased demand for surveillance and security solutions, which, in conjunction with the shift from analog to digital solutions, creates favorable market conditions. Another important factor is increased bandwidth, which allows a broader use of sound and imaging across the Internet.
Framework agreements on security and surveillance solutions have been signed with Securitas and Honeywell, among others.

OEM
In order to efficiently coordinate sales within the area of technologies, Axis' OEM sales and direct sales of technologies have been gathered within the OEM market segment. Through the OEM licensing of existing technologies, Axis offers custom-tailored network solutions within several application areas: video, print, scan, store and access. OEM customers consist extensively of large, global manufacturers of printers and copiers, as well as companies that develop and sell video and security equipment. Customers include companies such as Canon, Sony, Minolta, IBM, Intermec, Fuji Xerox, Epson, Sharp and Panasonic.
OEM deliveries of network technology to the major global equipment manufacturers represent a diversified market and is rather heavily exposed to competition. Direct competitors include companies such as NetSilicon (U.S.) and JCI (Japan). Like all OEM operations, the greatest threat is that customers will develop their own solutions instead of using external suppliers. However, the trend within Axis' areas of operations indicates clearly that equipment manufacturers are focusing increasingly on their core operations.

During 2001, Axis strengthened its position as an internationally leading OEM supplier of custom-tailored network solutions. New agreements were signed with several global equipment manufacturers, including Panasonic (MFP servers allowing documents to be printed and distributed electronically from Panasonic's copiers) and Minolta-QMS (ETRAX chips for network connection of laser printers). Axis' existing cooperation with, for example, Canon, has been deepened and broadened to also include Bluetooth products.
During the year, some of the first customers to have bought Linux-based development packages concluded their own design processes and began to buy the ETRAX 100 LX chip. These companies include U.S.-based Corporate Systems Center, which in June 2001 signed an order valued at approximately SEK 2 M annually. To date, Axis has sold some 700 development platforms, used by customers in the first stage of their development of ETRAX-based products.

OEM-CUSTOMERS

Customer adaptation
Video Print Scan Store Access
Applications

Development package/
technology/ chip sales

Operating systems in developmental environments
ETRAX 100 LX
The business model for the OEM market segment is based on Axis adapting technologies to specific customers and integrating it with the customer's products. Earnings are made primarily from three sources: fees for customer adaptation projects, product sales following the completion of a project and direct sales of Axis' technologies to other development companies.

Integrated products for Canon
At the end of 2001, Axis concluded a development project for an internal print server for two of Canon's latest digital copiers, the iR1600F and the iR2000F. The product is intimately integrated within the copiers and offers support for a long list of operative systems and printer protocols. The high level of integration also makes it possible to communicate with the copier's fax and scanning functions across the network. The print server is one of the first products to employ the ETRAX 100 LX, the latest generation of network processors developed in-house by Axis.

Product areas
Axis product portfolio comprises the Video, Print, Scan, Store and Access product areas. The end-users of Axis' products are mostly medium- and large-sized companies. They use the products partly in office environments and partly in other environments such as facilities, warehouses, production plants and stores.
A broad product portfolio

Video

Increased demand for network cameras and video servers has led to Video becoming the fastest growing of Axis' product areas during 2001. The company's products have received multiple awards and Axis has reinforced its leading position in the global market.
The fields of use for Axis network cameras and video servers span widely differing areas of operations. Axis works primarily within three areas: security, remote surveillance and Web attraction, i.e. providing moving images via the Internet for marketing or information purposes.
Markets and trends The market for network cameras and video server solutions developed strongly during 2001. Customers have moved on from early installations and migrated to professional use in operational environments while, at the same time, several suppliers have made efforts to become established. As yet, the market remains at an early stage of development, with a strong foundation for continued rapid growth over the next few years.
A number of differing factors generate demand. Most tangible are the overall trends towards a generally increased security awareness, the replacement of earlier, analog CCTV systems with digital, network-based solutions and the opening of new possibilities through digital technology. Strategic cooperative alliances, such as those between Axis and large companies such as Securitas and Honeywell, also contribute to driving the market forward.
Investments in improved infrastructure and increasing bandwidth for Internet connections represent a further factor benefiting growth. In pace with greater numbers of people having access to broadband and other solutions for faster Internet connections, demand for video and audio applications is increasing.

Axis currently enjoys a unique market position, holding a 69 percent share for network cameras and a 27 percent share for video servers. (Source: Frost & Sullivan 2001.) Competition primarily involves suppliers of analog surveillance cameras and simpler PC-connected cameras, known as Web-cameras, but also from companies that offer technologies similar to Axis'. Among these are companies such as JVC, Philips, Pentax, VCS and Convision. In pace with the further development of the market, it is also likely that the competitive situation will also change and that a greater number of large-scale players will attempt to establish themselves. Some of Axis' competitive advantages include leading technology, strong position with distributors and resellers and a well-established brand.
The differences in performance and functionality between network cameras and Web or PC cameras are extensive. A Web-camera is connected to a PC, which is in turn connected to a network, while a network camera has a built-in Web-server allowing the network camera to be connected directly to the network without the need for a PC.
The past year The demand for Axis' products and interest in them has been extensive, primarily in the U.S. market, where the level of interest from the security industry, which was already substantial, has been further reinforced following the tragic terrorist attacks of September 11, 2001. In Europe, development within this product area was also positive.
In May, Axis launched the world's first network camera, compatible with both analog and digital networks (the AXIS 2420). This allows customers to gradually upgrade their systems without having to immediately invest in a digital system.

A number of larger orders for network cameras were also received during the year. The single largest order, valued at approximately SEK 9 M, was signed in August when the Mexican elections authority ordered a camera solution for identity control.
A factor that contributed strongly to the positive development during the year was Axis' ADP program, a partnership program that links application developers to Axis. By means of technical assistance and the continual exchange of information, Axis helps selected partners to integrate video products into their software applications.
In October, the AXIS 2191 Audio Module was launched, adding sound capacity to network cameras. This increases the utility of the cameras while strength-

ening the application offering. During the year, the AXIS 2490 Serial Server was also launched. The server makes it possible to monitor and control equipment and units remotely using a "serial interface" directly via a network.

Market potential for network cameras and video servers

Year

Market potential (USD M)

Growth rate, %

2000 2001 2002 2003 2004 2005

135

86.4

235

73.7

398

69.4

586

47.0

791

35.0

Source: Frost & Sullivan, 2001
The Frost & Sullivan research company forecasts continued rapid growth for camera and video products over the next few years.

Axis video servers increase security at Sydney Airport When Sydney International Airport carried out a program of modernization and increased capacity from 4,560 passengers per hour to slightly more than 7,000, security formed an important element of the work.
To meet stringent requirements, a total solution based on Axis' video servers and Honeywell's Digital Video ManagerTM was chosen. The solution represents the first digital video surveillance system that supports integration with business systems.
"Axis' video servers are connected to more than 100 cameras, providing us with a total overview of what is going on at the airport. In addition, it is the only system we have seen that offers complete plug-and-watch functionality," says Russ Lewis, Information Manager at Sydney Airport.

Within the Print product area, Axis provides intelligent print servers across all kinds of networks. Axis facilitates user-friendly print functions for network administrators and users regardless of network environment and printer. With the markets' widest range of external print server solutions, Axis is able to meet the needs of both multinational corporations and smaller companies. With print servers and protocol converters it is possible for users of different types of computers, such as PCs, Macintoshes, Unix and IBM mainframes to share one and the same printer. In addition, the efficiency of the network is increased because the print server offloads print processes from computers and fileservers, while the printing quality and reliability are increased. Integrated management tools allow network administrators to manage print servers centrally using a standard Web browser.

Mixed computer environments at the Swedish National Labor Market Board In autumn 2001, the Swedish National Labor Market Board (AMS) installed a number of Axis' print servers for mixed computer environments. A requirement made by the customer was that the solution should support central monitoring and control in both the PC network and the IBM mainframe environment. Other factors contributing to the choice of Axis were: AMS' previous positive experiences with Axis' products, Axis' local presence and the possibility of obtaining qualified local support.

Product areas

Axis has developed and delivered print servers since the mid-1980s. Axis' solutions are to be found partly in external servers and partly in products intended to be integrated with printer suppliers' products.

Increasingly, printers are today sold with built-in print servers, which may negatively affect sales of external print servers. On the other hand, OEM sales are boosted by this development.

Markets and trends The market for print servers is well developed and Axis has been an important player in this market from the very start. The company was the first to offer pioneering functionality in such areas as multi-protocol support, Web-based administration and printing via Bluetooth wireless technology. Axis is one of the three largest players in the global market. In Europe, Axis is the second largest behind Hewlett-Packard. At the end of the year, Intel, in third place among the major global players during 2001, announced that it would be withdrawing from the print server market. This makes Axis the largest print server-independent manufacturer.
Axis currently has a foundation of more than one million print servers installed. The company has an extensive distribution network and expects to continue to expand its share in this market. This market is driven by, among other things, customers'
demand that all printers be networkable and accessible by users in all network environments. Since administration is a fast-growing cost, companies also want the ability to manage all printers centrally. This benefits sales of print servers that can be controlled from a central interface.

The past year The business model for sales of print servers is based on indirect sales via distributors and resellers. Because wide availability is important in an established market, Axis has worked actively during the year to expand its distribution platform in many markets. This has benefited sales within the print server segment. Axis also works actively with many printer manufacturers, such as Ricoh, OKI and Minolta.
Among the year's larger transactions was an order for advanced print servers from a Portuguese banking group valued at slightly more than SEK 3 M. The transaction formed part of the customer's efforts to standardize its IT environment. A strong argument in the choice of supplier was the fact that Axis' print servers simultaneously support both LAN and IBM mainframe environments. Axis' strong presence and support on the Iberian Peninsula was also a decisive factor.
During the year, the Axis 5800 Mobile was launched. This is a print server that makes wireless printing possible from mobile telephones, handheld computers and laptops using Bluetooth wireless technology. The product has attracted substantial international interest.

Scan and Store

Within the Scan and Store product areas, Axis is developing solutions for document distribution, document handling and data storage. Using these solutions, users can digitize documents, distribute them and store them on central servers via the network. In addition, users can share CDROMs and DVDs over the network. For network administrators, the advantages also include simple installation and administration.

An increasing amount of information can be digitized to allow for easier storage and distribution. With the help of Axis' Document Server, a scanner or digital copier can be transformed into a complete center for the scanning, distribution and printing of documents. Paper documents can be easily converted into electronic documents that can be distributed via e-mail.
Information on CD-ROMs and DVDs, including manuals and encyclopedias, are often intended for use by many people within an organization. Axis' Storage Server makes it possible

to share the discs across the network, giving many users the ability to simultaneously access files, software and other contents.
Markets and trends With regard to document servers, it is primarily the need to share scanners via networks that is driving developments. In Axis' evaluation, the market in Europe for network-connected scanners will expand over the next three years.
The increasing need to digitize a growing quantity of information and to make documents accessible in electronic form favors this segment. Demand for CD-ROM/DVD servers is powered by companies' desire to provide their employees with rapid and simple access to information. Axis is a market leader in this area with a market share exceeding 70 percent.

During the coming year, Axis will endeavor to complete its offerings in the Scan product area with more total-oriented solutions. Through its broad distribution network, the company will spread its message regarding the efficiency potential created by the use of IP networks for document distribution in comparison with traditional methods such as fax.
Common to all of the products within Scan and Store is the fact that they are sold via specialized integrators as part of total solutions, within which Axis delivers the server component (intelligent network switching). Sales will therefore be dependent, in part, on the development of the integrators.

Access
Axis' access points allow mobile users to connect wirelessly to local networks. Examples of applications within this product area include zones at airports and other public spaces where users are given the opportunity to connect wirelessly to local area networks and the Internet to send e-mails and perform other tasks. In office environments, access points can also provide a simple method by which mobile users can update information on laptops, handheld computers and mobile telephones. Axis' broad expertise within network connectivity and well-established position in the market make the company a credible supplier of wireless network connectivity.
Markets and trends The market for mobile applications is still in its infancy. The global decline in the economy and the effects this has had on companies' willingness to invest have put the brakes on development and forced several players to postpone launches.
In the current situation it is difficult to forecast how the market for wireless access points will develop during 2002. The factor causing the greatest uncertainty is when the Bluetooth standard will make its breakthrough. There already exists extensive interest, above all in Japan, in using Axis Bluetooth access points for many of the Bluetooth applications being developed.
The past year In May, Axis secured an order for access points for Bluetooth from Japan's largest telecommunications operator, NTT. The contract concerns a pilot project in a shopping center in Osaka for local mobile services and positioning.

Research and development
Axis develops solutions for network connectivity for many different products. During the year, the R&D unit worked on technical platforms, as well as on functionality, support for new protocols, and wireless communications. The focus in 2001 has been on product development and on reducing the time from concept to finished product to achieve profitability more rapidly.

Innovation that yields

A network-connected world Axis' research and development spans a broad area. The company's developers are working on Axis' platforms in the form of software and
hardware for network connections, and on producing applications for use in different environments such as offices and industrial
plants. More and more products are being connected to IP-based networks. Today, there
is primarily a need to connect such office products as scanners, data storage units, printers, cameras and the like in net-
works. In the future there will be a demand to include application areas
that we can hardly imagine today. But, whatever the need, Axis' technical platforms can be used to connect equipment securely and rapidly to wired and wireless networks.

A compact and powerful solution ETRAX, a so-called ASIC (Application Specific Integrated Circuit), that handles everything a network-connected unit must be able to do, is a cornerstone in the platforms. In a single powerful chip, ETRAX executes programs, makes calculations, and handles memory and communications with the outside world. The most recent version, ETRAX 100 LX, was developed especially to support the Linux open operating system.
Based on ETRAX and other components such as the image-compressing ARTPEC chip, Axis is building various applications that make it possible to connect units directly to a network without having to go through a personal computer. With the Axis platform, units can be connected to virtually any network, fixed or wireless. Axis also sells its technology, in the form of a developer package with ETRAX processors and development tools, to companies that want to integrate Axis technology in their own products.
The past year The program in the field of wireless communications was focused primarily on standards for WLAN, IEEE 802.11a/ 802.11b. Axis is also active in the HiperLAN/2 global forum. In addition, the company played an active role in the develop-

new positions

ment of protocols and tests and the implementation of functions for the Bluetooth SIG Personal Area Network Group.
In the area of functionality, Axis developed a Linux-based developer package within the framework of the Universal Plug and Play (UPnP) Forum, an initiative in which more than 400 suppliers of computers and equipment agreed on a standard for simple and reliable connection of network equipment. An MP3 player and a network camera, developed in-house, are used as examples of applications. The camera is today a reference application and is available in connection with the introduction of Microsoft Windows XP.
In the program of new network protocols, Axis completed a prototype installation of IPv6, the new IP standard that the company will begin to implement in 2002. The installation will be used as an example in connection with the development of IPv6 functions for other Axis products.
Production of the latest generation of the ETRAX chip, which was introduced in 2000, began during the year. Innovations offered by ETRAX 100 LX include increased performance, support for the Linux open operating system and lower cost per unit resulting from a new design.
Most of the company's products were upgraded during the year to permit the use of functions in the latest version of

ETRAX. Many products were also made available with new software versions to make them simpler to use and to increase their functionality.
Patents Following Axis' original vision that users should have access to everything, from anywhere, any time the company has consistently produced innovations that have given it a leading position in its field. Axis conducts an active patent program to protect investments within research and development and continually submits patent applications. Seven new patents were granted in 2001, covering the handling of embedded systems, processor systems for ETRAX and the ARTPEC compressing chip, as well as methods for network access.

Human resources

Axis is characterized by a corporate culture and strong values that enable its employees to feel a sense of belonging and involvement in the company. Opportunities for personal development, initiative and assumption of responsibility, as well as open communications, make Axis an exciting workplace.
The objective is to become the employer of choice in the industry

Axis' employees are a strategically important resource for the company's future growth. Making it possible for its employees to develop and expand their knowledge is essential if Axis is to maintain its position and its state-of-the-art expertise globally. Axis offers employees incentive programs that enable them to participate in the successes to which they contribute actively. Long-term personal financial involvement in the company increases motivation and strengthens loyalty. To ensure that Axis achieves its commercial objectives and that it attracts and holds the "right" personnel, the company works strategically on human resource issues, in line with its basic strategy. Clear communications, good leadership and smooth-functioning employee-relation processes are keys to success.
Young, highly educated employees At year-end 2001 Axis had 324 employees in 14 countries. Of this number, 146 were active in research and development and 131 were in sales, marketing and technical support. The average age of employees was 33.
Axis has been successful in attracting skilled persons to the company. Employees are given an opportunity to develop their knowledge on a continuing basis, and to share their experience with colleagues. To ensure a high level of expertise in the fu-

ture, good relationships with universities throughout the world are of great importance. Axis has for a number of years maintained continuing relationships with Lund Institute of Technology, among other institutions, and makes it possible for more than 30 students to perform graduate work in the field of research and development each year.
Corporate culture Great emphasis is placed on creating a corporate culture and a work environment that enables employees to feel that they are participating in the company's success. Axis is an innovative company, with strong values that guide daily operations. Work is generally performed in teams, but the individual is able to be "unique". We believe in diversity. The company acquires and shares new knowledge in order to improve continuously both as an organization and as individuals.
Axis, which is actively engaged in matters related to equality, developed a new "equality plan" during the year.
The company's management structure is decentralized and the organization has been built up in such a way that it is dynamic and able to react quickly to changes and opportunities in its business environment.

EMPLOYEES DISTRIBUTED BY REGION
EMEA 11%
US 7% Asia 11%
Sweden 71%

EMPLOYEES DISTRIBUTED BY FUNCTION

Other 15%
Sales, marketing, technical support 40%

Research and development
45%

The number of employees at year-end 2001 was 324 persons in 14 countries.

Approximately 146 of Axis' 324 employees are engaged in research and development, and 131 in sales, marketing and technical support.

17
Risk management

Axis is selling in an international market; 95 percent of its production is exported to more than 70 countries. This provides good distribution of business risk at the same time that the company is exposed to competition and other operating and financial risks.

Spreading risk in a global market

Axis competes with such strong players as Hewlett-Packard in a number of markets. Many products are exposed to pressure on prices, product changes and introductions of new standards. To handle these risks and secure its position in the market, Axis works continuously to improve both its technology and its products. In addition, distribution and reseller channels are being further developed continuously to increase the availability of company products and to strengthen prospects in both existing and new markets. To create balance and limit risks, Axis' policy is that distributors should have not more than a one-month inventory of company products at any time. No single Axis customer should account for more than 15 percent of the Group's total sales in a year. All components are produced by subcontractors. To distribute risk and avoid various types of production problems, Axis works with a large number of suppliers in different geographical markets.
Financial risks and currency policy As a result of its global exposure, Axis is vulnerable to financial risks related to currency, liquidity and borrowing. The Group policy covering financial operations establishes how risks are to be defined and measured, risk intervals and how responsibility and authority are delegated. A centralized financial function ensures effective control of financial risks and permits efficient handling of risk exposure.
Axis' currency policy is based on the premise that all hedging of currency flows should be on commercial terms, and non-speculative in character. Approximately 70 percent of anticipated sales, after deduction of costs, is hedged through forward currency contracts. Costs are offset against revenues in the same curren-

cy within the Group, regardless of where the revenues and costs arise. Thus, the Group's currency exposure, not that of an individual subsidiary, is hedged. If there is a risk that a change of 5 percent or more in the exchange rate, relative to the rate used in the accounts, will affect the income statement by more than SEK 0.5 M, currency hedging must be employed.
Currency flows in U.S. dollars, euros and yen the foreign currencies that constitute the greater part of the Group's currency risk are the main ones hedged.
Axis' subsidiaries in EMU (European Monetary Union) countries denominate sales in euros. As a result, most of the payment flows are simplified and the transparency of prices of Axis' products in the European market increases. Since 95 percent of Axis' production is exported, the weakening of the Swedish krona had a favorable impact of SEK 76 M on sales for the year.
Investing and financing As of December 31, 2001, Axis had liquid funds of SEK 181 M, as well as unutilized credit facilities amounting to SEK 85 M. Current credit commitments pertain mainly to the financing of operations.
The Group's liquid funds may be invested in financial instruments with a remaining maturity of not more than one year. If an investment is intended to be long-term, the remaining maturity of the current investment may amount to not more than two years. The financial department uses financial derivative instruments to limit risks in accordance with the financial policy. Derivative instruments are not employed for purposes of speculation.
With a gradually improved operating structure, sensitivity to interest-rate changes will be reduced.

Six-year review

Income statements, SEK 000s Net sales
of which Netch Costs of goods and services sold Gross profit
of which Netch Selling costs Administrative expenses Research and development expenses Items affecting comparability Other interest income Other interest expense Result from participations in associated companies Operating profit/loss
of which, Netch Net financial items Profit/loss after financial items
of which, Netch Tax for the period Minority share in profit/loss for the period Net profit/loss for the year

1996/1997 393,659 194,582 199,077
110,512 24,338 49,538
14,111
28,800 701 28,099 11,660
16,439

1997/1998 521,715
245,825 275,890
174,305
29,446 76,709
25,959
3,233 2,865 15,291
4,117 11,174
1,700
9,474

1998/1999 559,789
238,835 320,954
184,212
36,950 93,657
1,163 2,115 7,087 6,274 813 2,859
2,046

1999/2000
695,183 60,703 323,429 371,754 23,108 239,229 62,812 144,585
7,358 82,230 11,534 19,901 62,329 12,409 18,942 8,281 51,668

2000, 8 mos
493,651 42,844 283,356 210,295 18,109 186,648 53,483 133,065
2,139 15 165,025 56,877 5,710 170,735 58,638 35,790 27,091 107,854

Balance sheets, SEK 000s Fixed assets Inventories Accounts receivable trade Other receivables Liquid funds Total
Equity Minority interests Provisions Long-term liabilities Current liabilities Total

30 April, 1997 36,109 49,369 87,075 13,813 40,509
226,875
79,092
14,376 53,587 79,820 226,875

30 April, 1998 32,636 81,522
102,390 17,506 10,203
244,257
87,056
12,646 67,495 77,060 244,257

30 April, 1999 37,218 77,587
102,277 31,427
248,509
85,010
11,342 79,713 72,444 248,509

30 April, 2000 79,420 69,887
131,996 34,522 12,419
328,244
27,140 9,905 549
162,822 127,828 328,244

31 Dec. 2000 148,651 60,119 137,960 73,247 195,993 615,970
379,739 12,125 3,707 51,363 169,036 615,970

Cash flow statements, SEK 000s1) Cash flow from current operating activities before change in working capital Change in working capital Cash flow from current operating activities Cash flow from investing activities Cash flow from financing activities Cash flow for the period
Liquid funds at beginning of the period Liquid funds at end of period

1997/1998
2,664 53,921 51,257
14,351 6,870
30,306
40,509 10,203

1998/1999
5,932 14,493
8,561 12,985
10,875 10,671
10,203 468

1999/2000
79,978 30,270
49,708 15,232
77,827 12,887
468 12,419

2000, 8 mos
107,706 6,287
113,993 38,465 336,032 183,574
12,419 195,993

Operating cash flow, SEK 000s Profit/loss after financial items Depreciation Tax Total
Change in working capital Net investments Operating cash flow

1996/1997 28,099 5,267
16,714 16,652
9,722 5,849
1,081

1997/1998 11,174 7,233 5,658 12,749
53,921 17,814 58,986

1998/1999 813
8,110 3,870 5,053
14,493 11,831 21,271

1999/2000 62,329 13,030 1,726 51,025
30,270 29,634 50,389

2000, 8 mos 170,735 13,344 797 158,188
6,287 38,465 202,940

2001 696,333 20,479 340,754 355,579 5,903 212,011 66,262 151,052 33,296
6,922
158 113,806 30,521
35,687 149,493 31,691
48,445 10,941 90,107
Dec 31 2001 136,611 46,628 106,339 18,828 180,773 489,179
273,014
16,125 50,000 150,040 489,179
2001
80,502 54,922
25,537 12,460
22,820 15,220
195,993 180,773
2001 149,493
19,382 4,662 134,773
54,922 12,460 92,311

1) Figures for 1996/1997 not available.

Key ratios
Net sales growth (%) Gross margin (%) Operating margin (%) Profit margin (%) Depreciation (SEK M)
Equity (SEK M) Capital employed (SEK M) Interest-bearing liabilities (SEK M) Net interest-bearing liabilities (SEK M) Total assets (SEK M)
Return on capital employed (%) Return on total equity (%) Return on shareholders' equity (%)
Interest coverage ratio (multiple) Net debt/equity ratio (multiple) Equity/assets ratio (%) Share of risk-bearing capital (%) Capital turnover rate (multiple)
Number of employees (average for period) Sales per employee (SEK M) Operating profit per employee (SEK M)

1996/1997
20.2 50.6
7.3 7.1 5.0
79 133
54 13 227
30.3 17.6 21.7
5.5 0.2 34.9 41.2 3.5
165 2.4 0.2

Per-share data

1996/1997

Profit/loss per share, SEK per share

0.24

Cash flow, SEK per share

Equity, SEK per share

1.40

Share price at year-end

Share price/shareholders' equity, % per share

Dividend

0.04

Price/earnings ratio (P/E)

Market value/sales (P/S)

Total number of outstanding shares on closing day (000s) 56,400

Average number of shares (000s)

56,400

1) Where applicable, key ratios adjusted for 12 months. 2) Compared with pro forma for 2000.

1997/1998 32.5 52.9 2.9 2.1 7.2
87 155
67 57 244
18.3 11.2 11.4
1.7 0.7 35.6 40.8 3.6
243 2.1 0.1
1997/1998 0.14
1.54
56,400 56,400

1998/1999 7.3
57.3 1.3 0.1 8.1
85 165
80 80 249
5.3 3.4 0.9
1.1 0.9 34.2 38.8 3.5
313 1.8 0.0
1998/1999 0.03
1.51
56,400 56,400

1999/2000
24.2 53.5 11.8 9.0 13.0
27 200 163 150 328
28.8 18.2 111.3
5.4 5.6 11.3 11.3 3.8
445 1.6 0.2

2000, 8 mos1)
2.6 42.6 33.4 34.6 20.0
380 447
51 145
616
74.0 50.7 125.8
14.3 0.4 63.7 63.7 2.3
540 1.4 0.5

1999/2000 1.10
0.20
56,400 56,400

2000, 8 mos1) 3.89 4.19 5.50 17.50 318 1.6
68,900 65,775

2001
1.62) 51.1
16.3 21.5
19.4
273 339
50 131
489
26.8 19.1 45.8
2.4 0.5 55.8 57.4
1.8
439 1.6 0.3
2001 2.17 0.22
3.96 25.00
429
1.7 68,900 68,900

Definitions
Capital employed Total assets less non-interest bearing liabilities including deferred tax liability.
Capital turnover rate Net sales divided by average capital employed share (adjusted to 12 months for 2000).
Cash flow per share Cash flow for the year divided by the average number of shares (adjusted to 12 months for 2000).
Equity/assets ratio Shareholders' equity including minority interests as a percentage of total assets.
Equity per share Shareholders' equity divided by the number of outstanding shares.
Gross margin Gross profit as a percentage of net sales.
Interest coverage ratio Profit after net financial items plus financial expenses divided by financial expenses.

Net debt/equity ratio Net interest-bearing liabilities divided by shareholders' equity.
Net interest-bearing liabilities Interest-bearing liabilities reduced by liquid funds.
Operating margin Operating profit as a percentage of sales.
Operating profit Profit after net financial items as a percentage of sales.
Operating profit after depreciation of tangible fixed assets Operating profit after depreciation of tangible fixed assets as a percentage of sales.
P/E Market value divided by profit after full tax.
P/S Market value divided by net sales (adjusted to 12 months for 2000).
Profit/loss per employee Operating profit after depreciation divided by the average number of annual employees.

Profit/loss per share Profit for the period after full tax divided by the average number of shares (adjusted to 12 months for 2000).
Return on capital employed Profit after net financial items plus financial expenses divided by average shareholders' equity.
Return on equity Profit after net financial items less full tax divided by average shareholders' equity.
Return on total capital Profit after net financial items plus financial expenses divided by the average balance sheet total.
Sales per employee Sales divided by the average number of annual employees.
Share of risk-bearing capital Shareholders' equity plus minority interests and deferred tax liabilities as a percentage of the balance sheet total.

Pro forma accounts

During the second quarter of 2001, Axis completed a restructuring that included the sale of its 59 percent holding in Netch Technologies. In order to show the development of the restructured Axis Group, the table below shows a pro forma income statement in which Netch is excluded.

CONSOLIDATED INCOME STATEMENT

SEK 000s Net sales Cost of goods and services sold Gross profit/loss

Q1, 2000 132,368 76,711
55,657

Q2, 2000 150,236 62,610
87,626

Q3, 2000 157,134 74,277
82,857

Full year

Q4, 2000

2000

201,794 641,532

107,911 321,509

93,883 320,023

Q1, 2001 163,581 84,739
78,842

Q2, 2001 168,490 79,363
89,127

Q3, 2001 154,688 69,021
85,667

Full year

Q4, 2001

2001

189,095 675,854

81,249 314,372

107,846 361,482

Selling costs Administrative expenses Research and development expenses Items affecting comparability Other operating income Other operating expenses Shares in pretax profit/loss in associated companies Net operating profit/loss

53,522 14,378

67,856 24,050

52,409 15,886

71,509 245,296 16,731 71,045

53,417 17,038

61,302 16,662

39,343 13,342

49,870 203,932 15,523 62,565

39,672
2,286

39,905
458

47,043
4,512

48,621
2,338

175,241
2,338 7,256

38,250
2,486

49,797 20,296
484

30,812
1,455

32,193
2,497

151,052 20,296 6,922

54,201

44,643

36,993

40,640 176,477

32,349

59,414

715

7,763 83,285

Net profit or loss from financial investments
Net profit/loss after financial items

27,375 1,921

847 2,453 22,154

3,616 8,555

26,826 46,564 37,840 43,093 154,323 28,733 67,969

548 30,126 34,517 1,263 22,363 117,802

At the end of 2001, Axis replaced the previous division organization with a functional organization in which sales are reported by product group starting with the first quarter of 2002. The table below show pro forma sales figures for 2000 and 2001.

SALES BY PRODUCT GROUP
SEK 000s Video Print Scan Store Access Other Total

Q1, 2000 28,796 71,486 1,979 17,714 0 12,393
132,368

Q2, 2000 44,368 75,111 8,025 20,662 571 1,499
150,236

Q3, 2000 46,096 71,768 7,592 16,152 69 15,457
157,134

Q4, 2000 61,626 83,667 6,761 21,441 530 27,770
201,794

Full year 2000
180,886 302,032
24,356 75,968
1,170 57,119 641,532

Q1, 2001 52,419 80,821 8,211 14,130 1,062 6,938
163,581

Q2, 2001 53,562 75,326 7,904 12,316 677 18,705
168,490

Q3, 2001 58,671 70,562 5,781 10,478 1,273 7,924
154,689

Q4, 2001 73,670 81,828 3,281 13,720 2,146 14,450
189,095

Full year 2001
238,322 308,537
25,176 50,644
5,158 48,017 675,854

21
2001 Financial review Axis AB, Corp. reg. no. 556241-1065
The Board of Directors and the President hereby submit the Annual Report and the Consolidated Accounts for the fiscal year from January 1, 2001 to December 31, 2001. If not stated otherwise, all amounts are reported in SEK 000s. Figures in parentheses refer to the preceding year. Comparative figures in the Board of Directors' report are pro forma figures for 12 months, since the preceding fiscal year only consisted of 8 months.

Contents

Board of Directors' report

Income statements

Balance sheets

Cash flow statements

Notes

Audit report

Board of Directors' Report

Operations Axis develops solutions for user-friendly and secure communications over fixed and wireless networks. The Company is the leader in directly connected network solutions with a focus on products for offices, buildings and industrial environments. Axis, which was founded in 1984, has been listed on the Stockholm Stock Exchange's O list since June 2000 and on the Attract 40 list since January 2002. The Company has just over 300 employees and is active globally via its own offices in 14 countries and through partnerships with distributors and OEM partners in some 70 countries.
More than 95 percent of sales take place outside Sweden. All product development is conducted under the Company's own auspices, while production takes place through subcontractors in Sweden and in Southeast Asia. This strategy results in high flexibility, distribution of risk and an ability to quickly adapt operations to volume changes.
Comparative figures in this Board of Directors' report are pro forma figures, since the preceding fiscal year only consisted of eight months.
Important events The year was characterized by a concerted effort to achieve profitability during the third and fourth quarters. Axis' core products, the ThinServer products, were already profitable during the first quarter and have now achieved an operating margin of more than 10 percent. To achieve greater profitability, stronger sales growth and positive cash flow, a number of structural measures were implemented at midyear.
The 59 percent holding in Netch Technologies AB was sold during 2001. During the first half of the year, the negative impact on earnings from Netch Technologies amounted to SEK 31 M. When further financing requirements arose, Axis elected to sell its holding, which was no longer regarded as strategic.
The Mobile Access Server product was sold during the year to the product area's management. The business model for this product is based on system sales to telecom operators, which diverges from Axis' core business. In conjunction with this divestment, a five-year convertible loan in an amount of SEK 7 M was issued to the new company, which gives a possible ownership share of 47.5 percent. The divestment of this product area resulted in sharply reduced investment costs in the Mobile Internet business area without im-

pacting continued investments in wireless network products based on unlicensed radio technologies.
In addition to these structural measures, an action program was implemented that included personnel reductions of about 15 percent in the U.S. and Europe. Following these changes, the earnings improvement amount to more than SEK 100 M on an annual basis as of the third quarter.
In conjunction with a decision to change premises for the head office in Lund, a property holding in Lund was sold for about SEK 13 M. This sale did not have any positive effect on earnings, since costs for the move amounted to the corresponding sum.
During the fiscal year, sales within the Camera division continued to develop positively, with a sales increase corresponding to 33 percent over sales in 2000. The increase in demand is in part due to a gradual change in the market from analog to digital systems and the fact that both business and government are investing increasingly in securityenhancing infrastructure. New solutions are constantly being developed to further enhance business opportunities and open additional application areas. Several major orders for network cameras were received during the year, and strategically important framework agreements for security and monitoring systems were signed with such companies as Honeywell and Securitas.
Interest for the Axis 9010 Access Point remains strong, particularly in the Japanese market where an important contract for a pilot project for a shopping center in Osaka was signed with NTT. At the moment, it is difficult to predict how the market for access points will develop. The greatest uncertainty is when the Bluetooth standard will achieve a breakthrough.
Within the Networked Office division, several significant contracts were signed during the year, including two major orders for print servers from Singapore Airlines and a Portuguese banking group. Despite weak market conditions, the business area increased its market share in print servers. However, prevailing market conditions resulted in a decrease in sales corresponding to 12 percent. Axis continued its efforts to strengthen the division's distribution platform and to extend partnerships to additional geographic markets with such companies as Azlan, Ingram Micro and EET Nordic.
Gross margins improved significantly as a result of the relocation of an increasingly greater share of production to Asian suppliers and falling prices for certain components. During the second half of the year, gross margin improved

by 5.7 percentage points over margins in the first six months. Currently, about two thirds of annual production is outsourced to Asian sub-contractors. For comparable units, the gross margin amounted to 53.5 percent for the full year.
The holding in the U.S. company nBand was written off in its entirety since it was concluded that the company had not succeeded in securing continued financing. The company will be liquidated during fiscal 2002. Axis' ownership share amounts to 11 percent, which was previously booked valued at slightly more than SEK 32 M.

to an expenditure of SEK 12 M, which includes SEK 13 M received for the sale of a property holding in Lund and the acquisition of a convertible loan of SEK 7 M in Aptilo Networks AB.
Incentive program On May 23, 2001, the Annual General Meeting approved the Board of Directors' recommendation that Axis invite employees of the Axis Group to acquire a total of 310,600 warrants. The warrants were issued and transferred to employees during the year.

Research and development Following several years of intensive development work, growth in research and development costs have now been normalized. Compared with the preceding year, costs for research and development declined by18 percent and now amount to SEK 151 M (185). The reduction is primarily attributable to a reduction in personnel implemented in conjunction with the action program and a leveling off of investments in Mobile Internet. All costs for research and development were charged against income as they arose during the year.
Through collaboration with universities and research centers and participation in such technology forums as the Universal Plug and Play Forum, the Jini Community, the Internet Engineering Task Force (IETF) and HiperLan/2 Global Forum, Axis is able to influence emerging technology, obtain valuable ideas for future product development and get an early start in the application and development of future technology.
Financing and cash flow As of December 31, 2001, Axis had at its disposal funds totaling SEK 266 M, including liquid funds of SEK 181 M and unutilized credit commitments of SEK 85 M. The Company is thus financially strong going into 2002. Cash flow from current operations was negative in an amount of SEK 26 M. Due to the improvement in earnings and improvements in working capital, cash flow from current operations was positive in an amount of SEK 19 M during the final six months. Net investments for the year amounted to an expenditure of SEK 12 M, while cash flow amounted to SEK 15 M.
Investments Investments in tangible assets during the year amounted to SEK 5 M (SEK 16 M) and investments in intangible assets amounted to SEK 0 M (SEK 2 M). According to the consolidated cash flow statement, net investments for the year amounted

Ownership structure As of the end of the fiscal year, share capital in Axis AB was SEK 689,000, divided among 68,900,000 shares with a par value of SEK 0.01. All shares are of the same share class. Axis AB had 8,582 shareholders as of the end of the fiscal year. As of the same date, the six largest shareholders owned 70 percent of votes and equity.

Number of shares

Mikael Karlsson, privately and through companies LMK Industri AB

20,017,764

G. Kallstrom & Co AB (part of the Skanditek Group)

13,539,765

Martin Gren, through company (Grenspecialisten AB)

8,257,471

Livförsäkringsaktiebolaget Skandia

3,200,000

Fjärde AP-fonden

2,964,000

Other

20,921,000

Total

68,900,000

Proportion of equity and votes
29.1%
19.7%
12.0% 4.6% 4.3%
30.3% 100.0%

Financial performance and position Sales for comparable units amounted to SEK 676 M (642) during the year, which was an increase of 5 percent over sales in the preceding year. Including the divested Netch Technologies AB, consolidated sales amounted to SEK 696 M (708), a decline of 2 percent from sales in the preceding year. Exchange rate effects improved income by SEK 76 M.
Operating results for comparable units improved by SEK 93 M over results in the preceding year. Including restructuring costs totaling SEK 20 M, the operating loss was SEK 83 M (loss: 176) for comparable units. Including Netch Technologies, the operating loss amounted to SEK 114 M (loss: 240), corresponding to an improvement of SEK 126 M. The Group's profitability gradually improved during the fourth quarter with an operating profit of SEK 8 M (loss: 41), an improvement in operating income of SEK 49 M. Exchange rate effects improved income by SEK 26 M.

After net financial items, the loss amounted to SEK 149 M (loss: 171). Costs of SEK 41 M relating to write-downs of shares and the holdings in nBand Technologies Inc., Poobah Inc. and Aptilo Netowrks AB were charged against net financial items.

Operating profit/loss, SEK M

Q1, 2001 Q2, 2001 Q3, 2001 Q4, 2001 TOTAL

ThinServer products

434

706 16,327 19,617 37,084

Mobile Internet

23,820 24,652 9,529 3,861 61,862

Groupwide functions

8,963 15,172 6,083 7,993 38,211

Structural costs

32,349 39,118 20,296

715 7,763 62,989 20,296

Axis excluding Netch 32,349 59,414

715 7,763 83,285

Operating margin

19.8% 35.3% 0.5% 4.1% 12.3%

Netch Technologies AB 40,325 9,804

30,521

Group total

72,674 49,610

715 7,763 113,806

The Board of Directors' Working Procedures The Board of Directors consists of seven members elected by the Annual General Meeting. During the fiscal year, the Board held nine meetings. The Board of Directors works with an annual plan for agenda items and is in other respects subject to the special working procedure that the Board of Directors has established regarding the division of responsibilities between the Board of Directors and the President.
The Board of Directors has appointed a Compensation Committee whose primary assignment is to prepare decisions and guidelines relating to salaries and other terms of employment for personnel, the President and the Board members who are also Company employees. The Compensation Committee has consisted of Patrik Tigerschiöld, Östen Mäkitalo and Jan Wabréus.

Prospects for 2002 The strategic investments in technical, product and market development intended to strengthen the Company's position and enable growth continue according to plan. Axis' goal during the year is to continue develop in a profitable manner. At the same time, sales growth is expected to be weak during the first six months due to uncertain economic conditions. Further weakening of the Japanese economy toward the end of 2001 affects sales growth for Axis' own products, as well as OEM products. Nonetheless, Axis' retains its forecast of an operating profit for the full-year 2002.

The Parent Company The Parent Company's operations are primarily focused on Group administration. The Parent Company has no employees.
Sales to Group companies were insignificant. There were no purchases from Group companies.
The Parent Company is reporting a loss before tax of SEK 178 M (loss: 141).

Key ratios for the Group
2000, 2001 8 mos.

Net sales, SEK M

696 494

Operating profit/loss after financial items, SEK M

150 171

Total assets, SEK M

489 616

1999/ 2000 695
62 328

1998/ 1999 560
1 249

1997/ 1998 522
11 244

Equity/assets ratio Return on total capital Return on equity

56% 64% 11% 34% 36%

19% 34% 18%

3% 11%

46% 84% 111%

1% 11%

Profit/loss per share before dilution, SEK
Profit/loss per share after dilution, SEK
Number of shares before dilution, average, 000s
Number of shares after dilution, average, 000s

2.17 2.60 1.10 0.01 0.20 2.10 2.55 1.10 0.01 0.20 68,900 65,775 56,400 56,400 56,400 71,098 66,897 56,732 56,400 56,400

Number of employees at the end of the financial year

324 581 506 329 285

See note 29 for definitions.

Recommended treatment of loss in the Parent Company The amounts below are at the disposal of the Annual General Meeting:

Operating loss for the year Total, accumulated loss

SEK 58,972,590 SEK 58,972,590

The Board of Directors and the President recommend that the accumulated loss be treated so that:

The share premium reserve is reduced against the accumulated loss by
Total

SEK 58,972,590 SEK 58,972,590

Consolidated unrestricted equity corresponds to a deficit of SEK 62 M. No transfers from consolidated non-restricted equity to restricted equity are recommended.

25
Income statements

SEK 000s Net sales Cost of goods and services sold Gross profit/loss

Note 2

Selling costs

Administrative expenses

Research and development expenses

Other operating expenses

Items affecting comparability

Shares in pretax profit/loss in associated companies

Net operating profit/loss

3, 4

Net profit or loss from financial investments

Net profit or loss from shares in group companies

Interest income

Interest expense

Profit/loss after financial items

Change in tax equalization reserve Tax on profit/loss for the year Minority share in profit/loss for the period Net profit/loss for the year

10, 11

2001 696,333 340,754 355,579
212,011 66,262 151,052
6,922 33,296
158 113,806

Group 2000 8 mos.
493,651 283,356
210,295
186,648 53,483
133,065 2,139 15
165,025

8,419 44,106 149,493
48,445 10,941 90,107

5,440 11,150 170,735
35,790 27,091 107,854

1999/2000 695,183
323,429 371,754
239,229 62,812
144,585 7,358
82,230
29,677 9,776 62,329
18,942 8,281 51,668

Parent Company

2001

2000 8 mos.

4,310

2,345

4,310

2,345

7,886
3,576

6,065
3,720

67,487 13,270
120,653 178,446
10,488 108,985
58,973

103,190 27,397
61,393 140,906
140,906

Balance sheets
ASSETS, SEK 000s Fixed assets Intangible assets Intangible assets Rights Total intangible assets
Tangible assets Buildings and land Machinery and equipment Total tangible assets
Financial assets Equity in subsidiaries Equity in associated companies Other securities held as fixed assets Shares in tenant owners' association Receivables from associated companies Deferred tax claims Long-term receivables Total financial assets
Total fixed assets
Current assets Inventories Goods for resale Total inventories
Receivables Accounts receivable Tax receivables Receivable from Group companies Other receivables Prepaid expenses and accrued income Total receivables
Cash and bank deposits Cash and bank deposits Total cash and bank deposits
Total current assets
TOTAL ASSETS

Note

Dec. 31 2001

Group Dec. 31 2000

Apr. 30 2000

Parent Company

Dec. 31 2001

Dec. 31 2000

1,730

4,965

4,989

1,407

2,032

2,448

1,407

2,032

3,137

6,997

7,437

1,407

2,032

8,024

8,193

18,241

36,464

31,702

18,241

44,488

39,895

742

2,967

1,165

1,151

33,861

12,893

33,361

676

1,822

111,744

58,800

16,655

108,985

2,813

842

713

115,233

97,166

32,088

109,727

36,328

136,611

148,651

79,420

111,134

38,360

46,628 46,628
106,339 187
7,767 10,874 125,167
180,773 180,773
352,568
489,179

60,119 60,119
137,960 2,538
30,764 39,945 211,207
195,993 195,993
467,319
615,970

69,887 69,887
131,996 5,252 3,538
25,732 166,518
12,419 12,419
248,824
328,244

230,095 3,189 233,284
36,632 36,632
269,916
381,050

382,800 4,352 387,152
22,666 22,666
409,818
448,178

EQUITY AND LIABILITIES, SEK 000s Equity Restricted equity Share capital Restricted reserves Share premium reserve Restricted reserves Total restricted equity
Accumulated loss/Non-restricted equity Retained earnings Non-restricted reserves Profit/loss for the year Total accumulated loss/non-restricted equity
Total equity
Minority share of equity
Untaxed reserves Tax allocation reserve Total untaxed reserves
Provisions Other provisions Total provisions
Liabilities Long-term liabilities Liabilities to credit institutions Total long-term liabilities
Current liabilities Accounts payable Tax liabilities Liabilities to Group companies Other liabilities Accrued expenses and deferred income Total current liabilities Total liabilities
TOTAL EQUITY AND LIABILITIES
MEMORANDUM ITEMS Pledged assets Contingent liabilities

Note 22, 23

Dec. 31 2001

Group Dec. 31 2000

Apr. 30 2000

Parent Company

Dec. 31 2001

Dec. 31 2000

689
333,937 334,626

689
559,322 560,011

564
44,045 44,609

689 1,024 349,600
351,313

689 1,024 458,592
460,305

28,495 90,107 61,612
273,014

72,418 107,854 180,272
379,739
12,125

34,199 51,668 17,469
27,140
9,905

58,973 58,973
292,340

30,569
140,906 110,337
349,968

28,551

39,038

28,551

39,038

16,125

3,707

549

16,125

3,707

549

50,000

51,363

162,822

50,000

51,363

162,822

50,000

82,945

105,676

72,355

8,006

8,001

4,076

10,658

1,295

152

63,019

52,702

54,178

2,001

1,093

150,040

169,036

127,828

10,159

9,172

200,040

220,399

290,650

60,159

59,172

489,179

615,970

328,244

381,050

448,178

NONE

10,000

17,583

NONE

37,290

33,363

Cash flow statements

SEK 000s Current operations Operating profit/loss before financial items Depreciation and amortization Other items not affecting liquidity
Financial income received Group contribution received Financial expense paid Group contribution paid Tax paid
Change in inventories Change in accounts receivable Change in other current receivables Change in accounts payable Change in other current operating liabilities
Cash flow from current operations
Investment operations Investments in intangible assets Investments in tangible assets Sale of tangible assets Investments in associated companies Investments in subsidiaries Investments in other financial assets Sale of other financial assets Change in short-term financial investments Profit/loss upon sale of equity in subsidiaries Cash flow from investment operations
Financing operations Share premium upon issue of debt instruments New issue Change in long-term liabilities Payment from minority interest Exchange rate differences Group contribution received/paid Cash flow from financing operations
CASH FLOW FOR THE YEAR
Liquid funds at the beginning of the year Change in liquid funds Liquid funds at the end of the year

Note
8 9

2001
113,807 19,382 12,438
81,987
5,846
2,050 2,311 1,485
13,491 16,581 44,861 17,029 2,982 54,922
25,580

Group 2000 8 mos.
165,025 13,344 3,507
148,174
5,440
6,806 1,917 551
9,768 5,650 25,125 33,635 21,002 33,630
113,993

4,736 13,568
7,792 9,471
4,029 12,460

1,933 15,567
3 20,968 38,465

989
1,363 21,000
2,194
22,820
15,220
195,993 15,220 180,773

6,315 445,520 111,459
4,344
336,032
183,574
12,419 183,574 195,993

1999/2000
82,230 13,030
69,200
708
8,415 14,217 21,924
7,700 25,832
9,938 34,081 15,529 41,416
49,708
4,127 25,507
1,151
523 12,893
28,969 15,232
1,425
77,763
1,361
77,827
12,887
468 12,887 12,419

Parent Company

2001

2000 8 mos.

3,576 625
2,951
15,340 6,421
73,908 4,597
56,744
187,503 121 187,624
127,929

3,720 416
3,304
9,645
103,190 11,045 5,548 99,042
265,999 3,802 262,197
364,543

7,500 50,146 57,646

20,768 119,286 17,752 116,270

1,345
21,959 35,703 56,317
13,966
22,666 13,966 36,632

11,772 445,520 65,000
42,002
59,193 409,483
161,210
138,544 161,210 22,666

Notes
If not stated otherwise, all amounts are reported in SEK 000s.

Note 1 Accounting principles
The annual report and consolidated financial statements were prepared in accordance with the Swedish Annual Accounts Act and the recommendations and opinions of the Swedish Financial Accounting Standards Council. The accounting principles are unchanged from the preceding year.
Consolidated financial statements The consolidated financial statements include the Parent Company and the companies in which the Parent Company, directly or indirectly, controls more than 50 percent of votes as of the end of the fiscal year. Companies acquired during the year are included in the consolidated income statement with values commencing on the date of acquisition.
The consolidated accounts were prepared using the acquisition method, by which the acquisition value of shares in subsidiaries are eliminated against each subsidiary's equity as of date of acquisition. Equity is determined on a market appraisal of assets, provisions and liabilities as of the date of acquisition. To the extent there are untaxed reserves in acquired companies, a provision is made for deferred tax on such reserves, based on the tax rate in effect in the company's country of domicile. This tax is reported among provisions for taxes.
If the acquisition value of the shares in subsidiaries exceeds the value of acquired equity computed as described above, the difference is attributed to goodwill, which is amortized over its estimated useful life.
Companies acquired during the year are included in the consolidated financial statements as of the date they are acquired. Companies sold during the year are included in the consolidated financial statements until the date of sale. All companies included in the consolidated accounts apply the same accounting principles.
Translation of foreign subsidiaries All foreign subsidiaries within the Axis Group have been classified as integrated foreign business entities. Accordingly, the monetary/non-monetary method is applied for the translation of the financial statements of foreign subsidiaries. This means that the monetary assets and liabilities of foreign subsidiaries are translated at the closing day rate, while non-monetary assets are translated at the historical rate. All income statement items are translated at the average rate for the year. Translation differences are reported in the net profit or loss from financial investments.
When the Parent Company or another Group company in the Axis Group employs hedging in order to capitalize and shield against exchange rate differences on net investments in a subsidiary, the exchange difference on the hedging instrument is recorded directly against income from financial investments to the extent that it relates to a corresponding translation difference recorded during the year for the subsidiary.
Tax effects are taken into account upon unequal valuation of assets and liabilities at the Group or company level, which are reported as long-term or deferred tax liability. However, in accordance with Recommendation 9 issued by the Swedish Financial Accounting Standards Council, deferred tax on consolidated positive or negative goodwill is not taken into account.
Minority interest The minority interest in net profit/loss for the year and equity is based on the financial statements for the subsidiary prepared in accordance with Group accounting principles.
Associated companies Associated companies are companies that are not subsidiaries, but for which the Parent Company, directly or indirectly, controls between 20 and 50 percent of the votes for all Shares. Shares in associated companies are reported using the equity method.
According to the equity method, shares in the net profits or loss in associated companies are included in pretax profits or loss. If the acquisition value of shares in associated companies was higher than the proportion of equity in the acquired company as of the date of acquisition, the difference is treated as goodwill. The share of the associated company's taxes is included in the Group's tax expense. Holdings in associated companies are reported on the consolidated balance sheet at acquisition value, adjusted for contributions, dividends and share in net profits or loss following the acquisition.
Receivables and liabilities in foreign currency Current receivables and liabilities in foreign currency are translated at the yearend rate. Exchange rate differences are included in other operating revenues, except for exchange rate differences on liquid funds, which are reported in net financial income and expense.

"Hedge reporting" is applied to hedging of future currency flows. The net profit or loss from hedging transactions is reported on the income statement for the same period as the underlying flows.

Inventories Goods for resale are valued at the lower of cost or market value as of closing day, with the FIFO principle applied. Internal gains upon transactions between Group companies are eliminated.

Receivables Receivables are reported in the amounts at which they are expected to be paid.

Research and development expenditures Research and development expenditures are charged against income in the year they are incurred.

Income reporting Net sales are reported upon delivery of the goods and acceptance by the customer. Sales are reported after deductions for sales taxes and discounts, and after elimination of intragroup sales.

Tangible and intangible fixed assets
Tangible and intangible fixed assers are reported at the acquisition cost less depreciation and amortization according to plan. There are no pledges or commitments on future investments.
Planned depreciation and amortization are normally linear and computed based on the original acquisition value less assessed residual value and based on the estimated useful life of the asset, in accordance with the following:

Machinery and equipment Land improvements Software Rights

310 years 5 years 3 years 5 years

Income taxes
The year's tax expense is computed according to each country's tax regulations and the reported net profit or loss for the year. Remaining tax to be paid is reported under tax liability.
A provision for deferred tax is made on untaxed reserves at the prevailing tax rate for each country. Deferred tax claims on fiscal deficits are computed and recorded as deferred tax income on the income statement and as a longterm liability on the balance sheet. Deferred tax liability on fiscal deficits is reported in accordance with the company's election to apply the Swedish Financial Accounting Standards Council Recommendation 9. Deferred tax claims and deferred tax liabilities with the same tax authorities are reported as a net amount in the balance sheet. Deferred tax claims relating to accumulated loss carry-forwards are capitalized to the extent that it is deemed probably that the loss carryforward can be utilized against future taxable surpluses.
The early application of Recommendation 9, Income Tax, as of December 31, 2000 only affected the consolidated accounts. As of December 31, 2001, the Parent Company's accounts are also affected. Unlike previous years, the effect of the reporting of deferred tax claims has been included in unrestricted equity.

Cash flow statement
The cash flow analysis was prepared in accordance with the Swedish Financial Accounting Standards Council's Recommendation 7 in accordance with the indirect method. The change in liquid funds for the year is divided into operations, investment operations and financing operations. The starting point for the indirect method is the operating profit or loss adjusted for those transaction that do not entail cash payments. Liquid funds refer to cash and bank balances, as well as current investments. All items included in liquid funds can be converted to cash relatively quickly.

Leasing
Leasing fees for rented equipment are normally expensed during the rental period. The Group does not currently have any significant financial leasing agreements, meaning that all of the Group's leasing agreements are considered as operational for accounting purposes.

Provisions
Provisions are reported when the Group remains under legal or informal obligation as a result of previous events and where an outlay or resources to regulate the commitment is probable and where it is possible to calculate the amount in a reliable manner.

Note 2 Net sales distributed by product area and geographical market

Net sales are distributed by product area as follows:

2001

Group 2000 8 mos.

Document Division Camera Division Storage Division Technology Division Other
Mobile Internet Division Netch Technologies Total

363,935 243,025
50,649 4,136 8,892
670,637 5,217
20,479 696,333

241,485 136,912
48,009 1,634
21,597 449,637
1,170 42,844 493,651

1999/2000 395,903 94,702 128,302 15,573 634,480 60,703 695,183

Net sales are distributed by geographical market as follows:

2001

Group 2000 8 mos.

Europe (including Middle East and Africa) Asia North and South America Total

330,885 155,672 209,776 696,333

250,735 108,659 134,257 493,651

1999/2000
385,473 113,652 196,058 695,183

Note 3 Personnel The average number of employees and their distribution by sex during the year was:

2001

Women 2000 8 mos. 1999/2000

Parent company France Hong Kong and China Japan Netherlands Singapore, Korea, Malaysia and Australia Spain and Italy Great Britain Sweden Germany U.S. Group total

111

129

109

Men

2001 2000 8 mos. 1999/2000

255

322

237

329

411

336

2001 11 8
19 3

Total 2000 8 mos.
15
6 18
3

1999/2000 11
16 16

324

403

298

439

540

445

Salaries and other remuneration amounted to:

Board of Directors & President

2001 2000 8 mos. 1999/2000

Parent company France

Hong Kong and China

Japan

Netherlands

Singapore, Korea, Malaysia and Australia

Spain and Italy

Great Britain

Sweden Germany

3,227

2,212

2,426

U.S.

Group total

3,227

2,212

2,426

Parent company Subsidiaries Group total

Salaries and remuneration

2001 2000 8 mos. 1999/2000

213,438

157,251 170,168

213,438

157,251 170,168

Other

2001 2000 8 mos. 1999/2000

5,484

3,608

3,873

1,166

1,318

2,369

11,702

8,362

8,857

1,353

693

2001
5,484 1,166 11,702 1,353

Total 2000 8 mos.
3,608 1,318 8,362
693

1999/2000
3,873 2,369 8,857

8,808 1,776 4,713 139,198 4,619 31,392 210,211

4,532 983
4,248 106,519
3,933 20,843 155,039

4,240 895
4,960 90,139
4,807 47,602 167,742

8,808 1,776 4,713 142,425 4,619 31,392 213,438

4,532 983
4,248 108,731
3,933 20,843 157,251

4,240 895
4,960 92,565
4,807 47,602 170,168

Employer's contributions

2001 2000 8 mos. 1999/2000

72,100

51,910 49,358

72,100

51,910 49,358

(of which pension costs)

2001 2000 8 mos. 1999/2000

15,936

8,881

5,448

15,936

8,881

5,448

Note 3 Cont.

Wages, salaries and other remuneration to the Board of Directors and the President were paid through the subsidiary Axis Communications AB.
Of the Group's total pension expense, 456 (277) refers to the President of the Group. Pension expense for all employees who sit on the Board of Directors amounted to 372 (297). No pension benefits in addition to the normal pension plan are paid to senior executives.
Wages, salaries and other benefits paid to the Board of Directors and senior executives encumbered net income for the year by 3,227 (2,212), as set out below.
Group

Board of Directors

2000 1999/ 2001 8 mos. 2000

Remuneration to the Board of Directors

325 325 325

Salaries and remuneration 1,483 954 1,469

1,808 1,279 1,794

Wages, salaries and other remuneration refers to Mikael Karlsson and Martin Gren, who are both employees of the Group. Amutual period of notice of six months is required with respect to termination or resignation of the Chairman of the Board's employment. If his employment is terminated at the request of the company, he shall be entitled to severance pay of 840.
Some directors are included in the Group's warrants program as of 1999 on equal terms to other employees.

Executive management
Wages, salaries and other remuneration paid to the President encumbered net income for the year by 1,419 (933, 8 months 2000).
A mutual period of notice of six months is required with respect to termination or resignation of the President's employment. The President is paid annual salary of 1,400 with a possible bonus of 400. If his employment is terminated at the request of the company, he shall be entitled to severance pay of 1,400.

Note 4 Audit fees

Group
2000 2001 8 mos.

1999/ 2000

Audit fees paid to Öhrlings PricewaterhouseCoopers

435 470 276

Other fees paid to Öhrlings PricewaterhouseCoopers

847 1,477 486

Audit fees paid to other auditors

756 485 442

2,038 2,432 1,204

Audit fees and other fees paid to the Parent Company's auditors were charged entirely to the subsidiary Axis Communications AB.

Note 5 Net profit/loss from shares in Group companies

Parent Company

2000 2001 8 mos.

Group contribution received Write-down of shares in subsidiaries

6,421

-73,908 -103,190

-67,487 -103,190

Note 7 Interest expense and similar profit/loss items

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.

Interest expense
Exchange rate differences
Write-downs of shares in subsidiaries
Capital loss upon divestment of shares in subsidiaries
Write-downs of shares and financial instriments
Other financial expenses
Total

-2,058 -5,704 -7,902 -4,999 -10,605 -4,344 -1,361 -21,959 -42,002

-8,346

-330

-52,672

-40,861

-857 -1,102

-44,106 -11,150

-40,560

-513

-463 -440

-9,776 -120,653 -61,393

Note 8 Financial income received

Group

2000 2001 8 mos.

Interest income Other financial income Total

5,846
5,846

5,440
5,440

1999/ 2000
708
708

Parent Company 2000
2001 8 mos.
15,340 9,645 17,752
15,340 27,397

Note 9 Financial expenses incurred

Group
2000 2001 8 mos.

1999/ 2000

Interest expenses Other financial expenses Total

-2,050
-2,050

-5,704 -1,102 -6,806

-7,902 -513
-8,415

Parent Company 2000
2001 8 mos.
-4,597 -10,605 -440
-4,597 -11,045

Note 10 Current tax income

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.

Reported loss before tax To be added Taxable temporary differences Non-deductible expenses To be deducted: Non-taxable income Expenses charged against equity Taxable loss
Current tax income

-149,493 -170,735 -62,329 -167,958 -140,906

51,558

-1,592 40,111 8,346

2,909 1,107 1,779

-26

-50 -28,980

-30,789

-95,052 -169,678 -91,122 -127,847 -163,349

26,614 47,510 25,514 35,797 45,738

Note 6 Interest income and similar income items

Group

Parent Company

2000 1999/ 2001 8 mos. 2000

2000 2001 8 mos.

Interest income Capital gain upon sale of shares in subsidiaries Exchange rate differences Total

6,225 5,440 708 13,270 9,645

2,194 8,419

28,969

5,440 29,677

13,270

17,752 27,397

Note 11 Tax on loss for the year

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.

Current tax income
Deferred tax income relating to temporary differences
Deferred tax income relating to untaxed reserves
Deferred tax effect relating to intra-Group adjustments and changes in Group structure
Deferred tax income relating to difference in tax rates
Effect of reporting of deferred tax claims in l egal entities
Total tax income for the year

26,614 47,510 25,514 35,797 45,738

13,733 -585 -2,023 11,441 2,337

3,499 242 -363

2,949 -12,852 -6,305

1,650 1,475 2,119

61,747 -48,075

48,445 35,790 18,942 108,985

Note 12 Intangible assets

Group
2000 2001 8 mos.

1999/ 2000

Acquisition value, beginning of year
Acquisitions during the year Divestments of subsidiaries Reclassification from advances Reclassification to machinery and equipment
Acquisition value, end of year

8,340 5,257 -5,945

7,652

6,407 1,933

4,127
510

3,790

-2,020

8,340 6,407

Accumulated scheduled amortization, beginning of year Scheduled amortization for the year Divestments of subsidiaries Accumulated scheduled amortization, end of year
Planned residual value at the end of the year

-3,375 -1,418

-3,533 -1,957 -1,223

986

-195

-5,922 -3,375 -1,418

1,730 4,965 4,989

Items pertains mainly to software.

Note 13 Rights
Acquisition value, beginning of year Acquisitions during the year Acquisition value, end of year
Accumulated scheduled amortization, beginning of year Scheduled amortization for the year Accumulated scheduled a mortization, end of year Planned residual value at the end of the year Item pertains to name rights.

Group
2000 2001 8 mos.

3,126 3,126

-1,094 -678 -625 -416
-1,719 -1,094 1,407 2,032

1999/ 2000

Parent Company
2000 2001 8 mos.

3,126

3,126 3,126

3,126 3,126 3,126

-52 -1,094 -678

-626

-625 -416

-678 -1,719 -1,094

2,448 1,407 2,032

Note 14 Advances for intangible assets

Group 2001 2000 8 mos.

Acquisition value, beginning of year

Acquisitions during the year

Reclassification to intangible assets

Acquisition value, end of year

1999/2000 3,790 -3,790

Note 15 Buildings, land and land improvements

Group 2001 2000 8 mos.

Acquisition value, beginning of year Acquisitions during the year Divestments during the year Acquisition value, end of year

8,306
-7,039 1,267

8,306
8,306

1999/2000 7,039 1,267
8,306

Accumulated scheduled depreciation, beginning of year
Scheduled depreciation for the year
Accumulated scheduled depreciation, end of year
Planned residual value at the end of the year
Assessed values, Sweden

-282 -985
-1,267

-113 -169
-282
8,024 3,769

-113
-113
8,193 3,769

Note 16 Equipment

Group 2001 2000 8 mos.

Acquisition value, balance at beginning of year

93,302

Acquisitions during the year

4,736

Sales and discards for the year

-17,927

Acquisitions/divestments of subsidiaries -13,652

Reclassification from intangible assets

Acquisition value, end of year

66,459

79,476 15,567 -1,741
93,302

1999/2000
49,825 24,240
3,391 2,020 79,476

Accumulated scheduled depreciation,

beginning of year

-56,838

Scheduled depreciation for the year -14,239

Sales and discards for the year

16,384

Acquisitions/divestments of subsidiaries 6,475

Accumulated scheduled depreciation, end of year

-48,218

Planned residual value at the end of the year

18,241

-47,774 -10,802
1,738
-56,838
36,464

-35,616 -11,068
-1,090
-47,774
31,702

Note 17 Shares in subsidiaries

Registered Corp. Share of votes

Shares owned by Parent Company

Office Reg. No.

and capital

Axis Communications AB Gren&Karlsson Firmware AB Axis Technologies AB Axis Alfa AB Axis Beta AB Axis Gamma AB Netch Technologies AB 1)

Lund Lund Lund Lund Lund Lund

556253-6143 556304-6209 556485-0765 556599-4547 556599-4588 556599-4562

100% 100% 100% 100% 100% 100%

1) The Company's holding in Netch Technologies was divested as of June 30, 2001.

No. of shares
1,600 500 500 500 500
1,000

Par value
160 100 100 100 100 100

Dec. 31, 2001
342 50 50
100 100 100

742

Dec. 31, 2000
342 50 50
100 100 100 2,225
2,967

Shares owned by subsidiaries Axis Communications SA Axis Communications (UK) Ltd Axis Communications GmbH Axis Communications BV AxerNet Communications SA Axis Communications Inc Axis Communications Ltda Axis Communications KK

Registered Office
France Great Britain
Germany Netherlands
Spain U.S.
Brazil Japan

Note 18 Shares in associated companies

Basset A/S Total

Share of votes and capital

Share of votes and capital
100% 100% 100% 100% 100% 100% 100% 100%

Shares owned by subsidiaries

Registered Corp. Share of votes

Office Reg. No.

and capital

Axis Communications (S) Pte Ltd Singapore Axis Communications Korea Co. Ltd. Korea

100% 100%

Axis Communications Ltd Hong Kong, China

100%

Axis Communications Ltd

Shanghai, China

100%

Axis Communications Pty Ltd

Australia

100%

Axis Communications Ltd

Taiwan

100%

Axis Communications MI Sdn Bhd Malaysia

100%

Axis Network AB Axis Peripherals AB

Sweden 556505-3450 Sweden 556505-1785

100% 100%

No. of shares

01.12.31

Book value Group 00.12.31 1,165 1,165

00.04.30 1,151 1,151

Book value Parent Company

01.12.31

00.12.31

Note 19 Other securities held as fixed assets

Share of votes and capital

nBand Communications Inc

11%

Poobah Inc

EZ Travel AB

Total

No. of shares 3,507,198 6,300

01.12.31

Book value Group
00.12.31 32,898 463 500 33,861

00.04.30 12,893 12,893

Book value Parent Company

01.12.31

00.12.31

32,898

463

33,361

Note 20 Shares in tenant owners' association Acquisition value at beginning and end of year

2001 676

Group 2000 8 mos.
676

1999/2000 676

Note 21 Deferred tax receivables

The temporary difference in the Group and Parent Company accounts are the result of deferred tax claims and liabilities relating to the following items:

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.1)

Deferred tax claims2) Tangible and intangible fixed assets Financial assets Inventories Other provisions Accumulated loss carry-forwards Other items

31 11,441 2,677 2,461

3,623

5,304

11,441

103,044 66,645 23,055 97,544

119,738 70,268 28,359 108,985

(cont.) Deferred tax liabilities2) Tax equalization reserve Tangible and intangible fixed assets
Net deferred tax claims

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.1)

7,994 10,931 10,931

537 773

7,994 11,468 11,704

111,744 58,800 16,655 108,985

1) Deferred tax is taken into account in legal entities beginning with the 2001 fiscal year. For the preceding fiscal year, deferred tax was only taken into account in the consolidated accounts.
2) Deferred tax liabilities to the same tax authority are reported net in deferred tax receivables as of 2001. The preceding year has been adjusted accordingly.

Note 22 Change in equity

Group
Balance, beginning of year Reduction of premium fund Transfers between restricted and non-restricted equity Share premium upon issuance of debt instruments with attached warrants Exchange-rate change on warrants held by the Company Change in Group structure Profit/loss for the year
Balance, end of year

Parent Company
Balance, beginning of year Reduction of premium fund Share premium upon issuance of debt instruments with attached warrants Profit/loss for the year
Balance, end of year

Share capital
689
689

Share capital
689
689
Statutory reserve 1,024
1,024

Restricted reserves
559,322 -110,338 -114,017

Non-restricted reserves
-180,272 110,338 114,017

989 -367 -1,652

333,937

-15,588
28,495

Premium

Profit/loss

fund brought forward

458,592 -110,337

-110,337 110,337

1,345

349,600

Profit/loss for the year

-90,107 -90,107
Profit/loss for the year

-58,973 -58,973

Total equity
379,739
989 -367 -17,240 -90,107 273,014
Total equity 349,968

1,345 -58,973 292,340

Note 23 Equity

Note 25 Long-term liabilities

Axis AB presently has one outstanding warrants program that covers employees. The program was introduced in 1999 and directed at all employees of the Axis Group. The objective of the program is to stimulate long-term commitment among employees to the development of the Group's operations and profits. Employees in the United States are offered stock options.
All permanent employees in EMEA and Asia are eligible to participate in the program. Permanent employees in the American subsidiary are eligible to participate in a separate stock options program. The latter is directed only towards employees in the United States. In addition to the number of warrants offered to all permanent employees, senior executives are invited to acquire a limited additional number of warrants.
The terms of the American program are such that an option may be exercised upon the new issue of shares occurring after the day the option was acquired by the employee. Options are allotted after three years for the program from 1999. Under the programs from 2000 and 2001, options are allotted on four occasions over a period of two years, with 25 percent on each occasion.
The subscription price per share corresponds to 130 percent of the average, on each trading day, of the volume-weighted average of the prices noted during the day according to the Stockholm Exchange official price list for shares in the company computed over a period of five trading days.
The table below shows the conditions and effects on equity of the warrants program upon full exercise of all warrants.

Beneficiary

Maturity Subscrip- No. of No. of date tion price warrants shares Dilution

Personnel in Europe and Asia Oct. 1, 2004

19.50 430,000 430,000 0.60%

Personnel in Europe and Asia Sep. 30, 2005

54.00 1,128,000 1,128,000 1.60%

Personnel in Europe and Asia Sep. 30, 2005

63.00 172,250 172,250 0.30%

Personnel in Europe and Asia Oct. 2, 2006

18.00 221,600 221,600 0.30%

Personnel in the United States Oct. 1, 2004

19.50 140,000 140,000 0.20%

Personnel in the United States Sep. 30, 2010

48.00 172,250 172,250 0.30%

Personnel in the United States
Total

Oct. 2, 2006

18.00 89,000 89,000 0.10% 2,353,100 2,353,100 3.40%

All Group and Parent Company long-term liabilities will mature within 1 to 5 years.

Note 26 Accrued expenses and deferred income

Group
2000 2001 8 mos.

1999/ 2000

Accrued payroll expense Accrued employer's contributions Other accrued expenses Total

17,046 21,383 17,186
13,472 14,718 10,273 32,501 16,601 26,719 63,019 52,702 54,178

Parent Company

2000 2001 8 mos.

2,001 2,001

1,093 1,093

Note 27 Pledged assets
Lien on assets in Netch Technologies AB Pledged shares in Netch Technologies AB Total

Group
2000 2001 8 mos.

1999/ 2000

Parent Company
2000 2001 8 mos.

10,000

17,583

10,000 17,583

Note 28 Contingent liabilities
Contingent liabilities to the benefit of other Group companies Secured portion in addition to pro rate portion in the ongoing new issue in Netch Technologies Total

Parent Company 2000
2001 8 mos.
37,290 25,571
7,792 37,290 33,363

Note 29 Definitions of key ratios Equity ratio Equity, including minority interest, as a percentage of total assets.

Note 24 Untaxed reserves
Tax allocation reserve, 1996 tax year Tax allocation reserve, 1997 tax year Tax allocation reserve, 1998 tax year Tax allocation reserve, 1999 tax year Tax allocation reserve, 2000 tax year Total untaxed reserves
34

Parent Company 2000
2001 8 mos.
10,488 9,112 9,112 14,403 14,403 2,767 2,767 2,268 2,268 28,551 39,038

Return on total assets Operating profit/loss after financial items plus financial expenses divided by average total assets.
Return on equity Operating profit/loss after financial items less full tax divided by average equity.
Profit/loss per share before dilution Profit/loss after net financial items divided by the average number of shares.
Profit/loss per share after dilution Profit/loss after net financial items divided by the average number of shares after full subscription of outstanding warrants.

35
Lund, February 12, 2002

Mikael Karlsson Chairman

Peter Ragnarsson President

Dag Tigerschiöld

Patrik Tigerschiöld

Nils Rydbeck

Martin Gren

Jan Wabréus

Östen Mäkitalo

Audit report

To the Annual General Meeting of the shareholders of Axis AB Corporate registration number 556241-1065
We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of Axis AB for the financial year January 1, 2001 December 31, 2001. These accounts and the administration of the company are the responsibility of the Board of Directors and the President. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit. We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain reasonable assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the board of directors and the president, as well as evaluating the overall presentation of 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 of the company in order to be able to determine the liability, if any, to the company of any board member or the president. We also examined whether any board member or the president has, in any other way, acted in contravention of the Swedish Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below. The annual accounts and the consolidated accounts have been prepared in accordance with the Annual Accounts Act and, thereby, give a true and fair view of the company's and the Group's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of the parent company and the Group be adopted, that the loss for the parent company be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year.
Lund, February 12, 2002
Öhrlings PricewaterhouseCoopers AB

Anders Lundin
Authorized Public Accountant Senior Auditor

Dan Andersson Authorized Public Accountant

Board of Directors and Auditors

Mikael Karlsson

Patrik Tigerschiöld

Martin Gren

Nils Rydbeck

Dag Tigerschiöld

Jan Wabréus

Östen Mäkitalo

Board of Directors
Mikael Karlsson, born 1962 Board Chairman Board Chairman of IT-Öresund. Vice Chairman of the Institute for Economic Research at University of Lund and the Technology Bridge Foundation Lund. Board member of Beijer Electronics AB, Decuma AB, Ruben Rausings Fund, SEB in Lund, Southern Sweden Chamber of Industry and Commerce and Visionalis AB. Member of the Royal Academy of Engineering Science and the Advisory Council at the Lund College of Economics. Member of the Board since 1984. President 19841999. Chairman since 2000. Shares in Axis: 20,017,764 1 Warrants in Axis: 0
Patrik Tigerschiöld, born 1964 Vice Chairman President of Skanditek Industriförvaltning AB. Board Chairman of CMA Microdialysis AB, The Chimney Pot AB and Theducation AB. Board member of, among others, H Lundén Kapitalförvaltning AB, Mydata Automation AB, PartnerTech AB, PBK Outsourcing AB, Skanditek Industriförvaltning AB and Vitrolife AB. Member of the Board since 2001. Shares in Axis: 5,000 Warrants in Axis: 0
1 Privately and through LMK Industri AB.
2 Through AB Grenspecialisten.
3 Issued by LMK Industri AB.

Martin Gren, born 1962 Board Chairman of Innolite. Board member of Switchcore AB and Itact AB. Member of the Board since 1984. Shares in Axis: 8,257,471 2 Warrants in Axis: 1,000.
Nils Rydbeck, born 1946 Board member of Anoto AB, Ctech AB and Ericsson Technology Licensing AB. Member of Advisory Committee School of Management North Carolina State University. Member of the Board since 1997. Shares in Axis: 0 Warrants in Axis: 3,000
Dag Tigerschiöld, born 1942 Board Chairman of LGP Telecom Holding AB and Mydata Automation AB. Board member of Skanditek Industriförvaltning AB, Industriförvaltnings AB Kinnevik and Investment AB Öresund. Member of the Board since 1986. Chairman 19941999. Shares in Axis: 2,427,600 Warrants in Axis: 0
Auditors
Öhrlings PricewaterhouseCoopers Senior Auditor Anders Lundin, born 1956 Authorized Public Accountant Assigned to Axis since 1996.
Dan Andersson, born 1956 Authorized Public Accountant Assigned to Axis since 2001.

Jan Wabréus, born 1941 President, Timelox AB and head of subsidiaries in Assa Abloy AB. Member of the Board since 1985. Chairman 19851994. Shares in Axis: 0 Warrants in Axis: 3,000 Call options in Axis; 20,0003
Östen Mäkitalo, born 1938 Strategy Director, Telia Mobile AB. Board Chairman of Centre for Distance-Spanning Technology at Luleå University of Technology. Board member of Aaro Systems AB, isMobile AB (Telia part-owner), Goyada AB, Foreveryneed AB and Swedish Institute of Space Physics. Member of the Royal Academy of Engineering Science. Member of the Board since 2000. Shares in Axis: 0 Call options in Axis: 5,000 3
Deputy auditor
Gustav Jönsson, born 1950 Authorized Public Accountant Assigned to Axis since 1984.

Group management

Bengt Christensson

Anders Laurin

Charlotta Falvin

Bengt-Arne Molin

Kenneth Jonsson

Ray Mauritsson

Peter Ragnarsson

Jörgen Lindquist

Kerstin Thulin

Executive Group management

Anne Rhenman Group function managers

Bodil Sonesson Segment managers

Executive Group management

Peter Ragnarsson, born 1963 President and Chief Executive Officer Employed within Axis since 1995. Shares in Axis: 10,750 Warrants in Axis: 164,000

Bengt-Arne Molin, born 1958 Executive Vice President and Chief Technology Officer Employed within Axis since 1999. Shares in Axis: 750 Warrants in Axis: 4,800

Charlotta Falvin, born 1966 Executive Vice President and Chief Operating Officer Employed within Axis since 1994. Shares in Axis: 10,750 Warrants in Axis: 20,600

Kerstin Thulin, born 1948 Executive Vice President and Chief Personnel Officer Employed within Axis since 2001. Shares in Axis: 1,000 Warrants in Axis: 1,000

Jörgen Lindquist, born 1965 Executive Vice President and Chief Financial Officer Employed within Axis since 2000. Shares in Axis: 5,000 Warrants in Axis: 0

Group management

Group function managers
Bengt Christensson, born 1960 Vice President, Strategic Alliances Employed within Axis since 1986. Shares in Axis: 140,750 Stock options in Axis: 75,000
Kenneth Jonsson, born 1960 Vice President, Engineering Employed within Axis since 1985. Shares in Axis: 10,750 Warrants in Axis: 5,000
Anne Rhenman, born 1957 Director, Investor Relations & Corporate Communications Employed within Axis since 2000. Shares in Axis: 1,000 Warrants in Axis: 61,000

Peter Ragnarsson CEO

Finance/Admin. Jörgen Lindquist
CFO

HR & Internal com. Kerstin Thulin CPO

IR & Corp com. Anne Rhenman

Strategic Alliances Bengt Christensson

Segment managers
Anders Laurin, born 1960 Vice President, Networked Facility Employed within Axis since 1997. Shares in Axis: 8,350 Warrants in Axis: 51,000
Ray Mauritsson, born 1962 Vice President, OEM Employed within Axis since 1995. Shares in Axis: 13,000 Warrants in Axis: 21,000
Bodil Sonesson, born 1968 Vice President, Networked Office Employed within Axis since 1996. Shares in Axis: 750 Warrants in Axis: 26,000

Sales & Marketing Charlotta Falvin
COO

Research & Development Bengt-Arne Molin CTO

Operations Jörgen Lindquist
CFO

The Axis share

Axis on the stock exchange Axis was listed on the Stockholm Exchange O-List on June 27, 2000. As of January 1, 2002, the Axis share is included on the Attract 40 list. Total trading was 16,826,912 shares, resulting in a turnover of 67,308 shares per day. The share was traded on all trading days on the Exchange, with an average value of SEK 1.1 M per trading day. The rate of turnover during the year was 24 percent.
The Axis share price rose 47 percent during the year. The Stockholm Exchange General Index fell 17 percent during the same period. The Axis share closing price on December 31, 2001 was SEK 25.00, corresponding to a market capitalization of SEK 1,722 M.

Share capital The share capital amounts to SEK 689,000, distributed among 68,900,000 shares, each with a par value of SEK 0.01.

Share capital distribution

Year 1984 1985 1987 1997 1999 2000

No. of shares 500
5,040 5,640 564,000 56,400,000 68,900,000

Par value (SEK) Share capital (SEK)

100.00

50,000

100.00

504,000

100.00

564,000

1.00

564,000

0.01

564,000

0.01

689,000

SHARE TREND

Ownership

The number of shareholders at December 31, 2001 was 8,582

(8,226). Institutional owners with holdings exceeding 50,000

shares accounted for 21 percent. The percentage of foreign

owners was 3 percent.

On June 7, 2001, the redemption agreement ceased to ap-

ply for the principal share owners and certain senior execu-

tives.

Axis' ownership structure is shown in the table below as of

December 28, 2001.

No. of shares

Mikael Karlsson, private and through companies (LMK Industri AB)

20,017,764

G Kallstrom & Co AB (part of Skanditek Group)

13,539,765

Martin Gren, through companies (Grenspecialisten AB)

8,257,471

Livförsäkringsbolaget Skandia

3,200,000

Fjärde AP-fonden

2,964,000

Others

20,921,000

Total

68,900,000

Percentage of capital and votes
29.1%
19.7%
12.0%
4.6% 4.3% 30.3% 100.0%

Ownership structure

Shareholding

No. of No. of shareshares % holders %

1500

1,303,572 1.89 5,982 69.70

5011,000

1,218,203 1.77 1,386 16.15

1,00110,000 3,217,031 4.67 1,101 12.83

10,00150,000 1,363,470 1.98

70 0.82

50,001100,000 785,150 1.14

11 0.13

100,001

61,012,574 88.55

32 0.37

Total

68,900,000

8,582

No. of votes % 1,303,572 1.89 1,218,203 1.77 3,217,031 4.67 1,363,470 1.98 785,150 1.14 61,012,574 88.55 68,900,000

The Axis share

Affärsvärldens General Index

Affärsvärldens IT Index

5 J FMA MJ J
2001

Share traded, 000s
4,000 3,000 2,000 1,000 A SOND

Dividend and dividend policy The Board and the President propose that no dividend be paid for 2001. Dividend policy will continue to be restrictive pending the operations generating a positive cash flow as well as earnings and a financial position that permits payment of a dividend.
Warrant program Since 1999 all employees of the Axis Group has been offered to take part in several incentive programs. For more information, see note 23 on page 34.

The Axis share price rose 47 percent during 2001.

See page 19 for per-share data.

39
Glossary

ASIC Application Specific Integrated Circuit. A circuit designed for a specific application, as opposed to a general purpose circuit, such as a microprocessor. Using ASICs as components in electronic devices can improve performance, reduce power consumption, increase reliability and reduce costs.
Bluetooth Bluetooth is an open standard for wireless transmission of voice and data between mobile devices (PCs, handheld computers, telephone and printers).
Broadband High-speed transmission. The term is used to define the speed of communication lines or services and most commonly refers to T1 (1.544 Mbit/s) rates or better, even though the actual rate may be much lower or higher, depending on the application.
CD-ROM Compact Disc Read Only Memory. An optical disc that is used to store text, graphics and audio data for computer applications. The contents may not be changed or rewritten.
DVD Digital Versatile Disc. An optic disc with the same physical size as a CD but with significantly greater storage capacity.
Ethernet The most common standard for network communication in LANs (Local Area Networks).
HiperLAN/2 A standard for high-speed wireless LANs that supports data rates up to 54 Mbit/s. This system is similar to 802.11a and uses the same 5 GHz frequency band.

IEEE 802.11 A family of standards for wireless LANs. 802.11 supports 1 or 2 Mbit/s transmission on the 2.4 GHz band, while 802.11b specifies a 11 Mbit/s data rate on the 2.4 GHz band and 802.11a allows up to 54 Mbit/s on the 5 GHz band.
IP Internet Protocol. A network and transport protocol used for exchanging data over the Internet. See also TCP/IP.
LAN Local Area Network. A communication network that serves users within a limited geographic area. The most common type of LAN is Ethernet.
Linux Linux is an open source operating system within the Unix family. Because of its robustness and availability, Linux has won popularity in the open source community and among commercial application developers.
Mbit/s Megabits per second = one million data bits, zeroes and ones, per second. This is a measure of how quickly data is transmitted over a communication link.
MFP Multi-Function Peripheral. Hardware that combines several functions in a single unit, such as a combined fax, copier, printer and scanner.
Network connectivity The physical (wired or wireless) and logical (protocol) connection of a computer network or an individual device to a network, such as the Internet or a LAN.
OEM Original Equipment Manufacturer. This is a designation for a company that supplies products to customers that in turn integrate the products into their own solutions and/or sells them under their own brand names.

PDA
Personal Digital Assistant. A handheld computer that provides a calendar and organizer for personal information. A PDA normally contains at least one database with names and addresses, to-do lists and a notepad.
Print server
A thin server that connects a printer to a network and allows users to share the printer. It may be a separate unit or a plug-in card in the printer.
Protocol
A set of formalized rules that describe how data is transmitted over a network. Low-level protocols define the electrical and physical standard, while high-level protocols deal with formatting of data. TCP and IP are examples of high-level protocols.
Server
A computer or software application that provides services to other computers connected via a network. The most common example is a file server that has a local disk and handles requests from clients to read and write files on this disk.
TCP/IP
Transmission Control Protocol over Internet Protocol. The TCP/IP protocol defines how data can be transmitted in a secure manner between networks. TCP/IP is the most widely used communications standard and is the basis for the Internet.
Thin server
A network-based device that is designed to perform a specialized set of server functions, such as a print server or NAS (Network Attached Storage). A thin server offloads general-purpose application servers and makes using the network more efficient by providing functionality that is easier to install and more reliable than a conventional server.

Addresses

Axis offices
SWEDEN Head office, Lund Axis Communications AB Emdalavägen 14 SE-223 69 Lund Tel: +46 46 272 18 00 Fax: +46 46 13 61 30
Stockholm Axis Communications AB Riddargatan 7a SE-114 35 Stockholm Tel: +46 8 555 194 77 Fax: +46 8 555 194 90

AUSTRALIA Sydney Axis Communications Pty Ltd Suite 1001, Level 10 275 Alfred Street North Sydney NSW 2060 Tel: +612 9957 6700 Fax: +612 9957 6399
CHINA Shanghai Axis Communications Ltd Rm. 001, 6/F, Novel Building 887 Huai Hai Zhong Rd. Shanghai 200020 Tel: +86 21 6431 1690 Fax: +86 21 6433 8264
FRANCE Paris Axis Communications S.A. 79 avenue Aristide Briand 94230 Cachan Tel: +33 1 49 69 15 50 Fax: +33 1 49 69 15 59
GERMANY Munich Axis Communications GmbH Lilienthalstr. 25 DE-85399 Hallbergmoos Tel: +49 811 555 08 0 Fax: +49 811 555 08 69
GREAT BRITAIN London Axis Communications Ltd. Greenhill House 90-93 Cowcross Street London EC1M 6BH Tel: +44 870 162 0047 Fax: +44 20 7553 9209

ITALY Torino Axis Communications Via Roma 33 10025 Pino Torinese Torino Tel/Fax: +39 011 841 321
JAPAN Tokyo Axis Communications K.K. TFT Building East Wing 7th floor 3-1 Ariake Koto-ku Tokyo 135-8071 Tel: +81 3 5531 8041 Fax: +81 3 5531 8042
KOREA Seoul Axis Communications Korea Co., Ltd. Rm 407, Life Combi B/D. 61-4 Yoido-dong Yeongdeungpo-Ku Seoul Tel: +82 2 780 9636 Fax: +82 2 780 2743
NETHERLANDS Rotterdam Axis Communications BV Benelux Glashaven 38 NL-3011 XJ Rotterdam Tel: +31 10 444 34 34 Fax: +31 10 750 46 99
SINGAPORE Axis Communications (S) Pte Ltd 541 Orchard Road #18-03/04 Liat Towers Singapore 238881 Tel: +65 6 836 2777 Fax: +65 6 836 3106

SPAIN Madrid Axernet Communications S.A. Sector Oficios 31, 1 ES-28760 Tres Cantos Madrid Tel: +34 91 803 46 43 Fax: +34 91 803 54 52
TAIWAN Taipei Axis Communications Ltd 8F-11,101 Fushing North Road Taipei Tel: +886 2 2546 9668 Fax: +886 2 2546 1911
U.S. Boston Axis Communications Inc. 100 Apollo Drive Chelmsford, MA 01824 Tel: +1 978 614 2000 Fax: +1 978 614 2100
Miami Axis Communications Inc. 2655 South Bayshore Drive Suite 302 Miami, FL 33133 Tel: +1 305 860 8226 Fax: +1 305 860 9622
San Diego 9191 Towne Center Drive Suite #420 San Diego, CA 92122 Tel: +1 858 458 1678 Fax: +1 858 458 1656
Sunnyvale Axis Communications Inc. 1170 Sesame Drive Sunnyvale, CA 94087 Tel: +1 408 730 0270 Fax: +1 408 730 0275

Financial information for 2002

41
Analysts who monitor Axis on a continuing basis

Three-month interim report Six-month interim report Nine-month interim report Year-end report Annual Report 2002

April 19, 2002 July 19, 2002 October 18, 2002 February 2003
March 2003

Axis's financial information is available in Swedish and English on the Axis Web site at: www.axis.com/corporate/investor/

The annual report can be ordered from: Axis AB Emdalavägen 14 SE-223 69 Lund Tel: +46-46 272 18 00 Fax: +46-46 13 61 30 E-mail: ir@axis.com

Company Danske Securities Deutsche Bank E. Öhman J:or Fondkommission Enskilda Securities Erik Penser Fondkommission Handelsbanken Securities JP Nordiska Nordea Securities REDEYE

Name David Jacobsson
David Halldén Stefan Wigstrand Mattias Wallander Henrik Ingvarsson
Jonas Eixmann Mikael Laséen Greger Johansson
Pontus Herin

Dividend The Board and the President propose that no dividend be paid for 2001.
Nomination of Board members Those shareholders who wish to propose names in advance for new Board members may contact the Chairman Mikael Karlsson in writing at the following address: Axis AB, Emdalavägen 14, SE-223 69 Lund, Sweden, or by telephone: +46-46 272 18 00.

Invitation to Annual General Meeting
The Annual General Meeting is being held at Edison Park, Emdalavägen 14, Lund, Sweden, on Wednesday, April 25, 2002 at 5:00 p.m.
Shareholders who wish to participate in the Meeting must be listed in the share register maintained by VPC AB (Swedish Securities Register Center) no later than Monday, April 15, 2002. Those shareholders whose shares are registered in the name of a trustee, must in sufficient time ensure that the shares are re-registered at VPC in their own name, so-called voting right registration, on the aforementioned date.
Notice to participate must also be made to Axis AB no later than 4:00 p.m., Friday, April 19, 2002. At notification, the shareholders should provide name, personal identification or corporate registration number, address and telephone number. If participation is by proxy, this document must be forwarded prior to the Meeting. In connection with notification, the number of assistants that the shareholder wishes to bring should be noted. Notification can be made · in writing to Axis AB, Attn: Adrienne Jacobsen Em-
dalavägen 14, SE-223 69 Lund, Sweden, · by telephone, +46-46 272 18 00 to Axis's head office, or · by e-mail at address bolagstamma@axis.com

Reg. no. 556241-1065
Axis AB, Emdalavägen 14 SE-223 69 Lund, Sweden
www.axis.com

Production: AXIS/n3prenör. Photo: Niclas Bomgren and others Printed by Strokirk Landströms 2002.

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