20 07

ANNUAL REPORT

20 07

Contents

Financial overview 3

Year in brief 4

This is Doro 5

CEO’s statement 6

Organization 9

Strategy 10

Care Electronics 12

Home Electronics 14

Business Electronics 16

Environment & Quality 18

Shares 20

Directors’ report 21

Income statement 25

Balance sheet 26

Shareholders’ equity 28

Cash flow statement 30

Quarterly summary 31

Five-year summary 32

Accounting principles 33

Notes 36

Definitions 43

Auditor’s report 45

Group management 46

Board of directors 47

Financial overview 2007

Five-year summary

Key figures

INCOME STATEMENT (SEK M) Income

Operating profit/loss before changes/write downs Profit/loss after financial items

BALANCE SHEET (SEK M) Shareholders’ equity

Balance sheet total

RETURN RATIOS

Average return on capital employed % Average return on shareholders’ equity % MARGINS

Operating margin %

Value added per employee (SEK m per person) CAPITAL INTENSITY

Capital turnover rate (multiple) FINANCIAL MEASUREMENTS Debt/equity ratio %

Cash flow from current activities Number of employees (average) Liquid assets (incl. unused credit)

2007 2006 2005 2004 2003

346.3 433.2 621.3 648.8 647.5 10.0 –57.3 –60.7 24.8 34.6 8.1 –81.7 –75.2 27.3 27.6

39.5 31.6 32.1 96.3 70.4 161.4 181.7 270.0 307.3 242.4

27.1 neg neg 18.1 18.1

21.1 neg neg 32.2 25.6

2.7 –17.8 –11.4 2.9 2.3

1.7 1.2 1.1 1.2 1.3

24.5 17.4 11.9 31.3 29.0 –30.2 –5.4 –43.5 –28.7 40.7

69 87 146 171 172

60.0 68.0 17.1 46.6 149.2

2.0 1.9 2.2 2.4 2.7

2007 SALES (%) 2006

Home Care Business Home Care Business

NeoBio ^™

New mobile telephones speciall y developed for an older target group received Doro’s most outstanding breakthrough on the market. The Doro HandleEasy 326gsm is a simple mobile phone with a large, easy to read display, large well-defined buttons and grip-friendly surface.

Doro launched its new NeoBio DECT product series in 2007 with similarities to the previous Doro 500 and 600 series but with new characteristics. The design builds on clean lines and Swedish design.

Doro has gathered products for professional users of headsets under the Doro ProSound name.

During the year Doro was the first Swedish company and second company in the world to get a headset TCO certified – the Doro ProSound hs1120.

ProSound hs1120 HandleEasy 326gsm

Year in brief

• Sales amounted to SEK 346 million (433 m), which ad- justed for the sale of companies is equivalent to a drop of 5 per cent.

• The operating profit was SEK 9 million (–77 m) and the profit after tax was SEK 8 million (–95 m). The profit for the year has been negatively affected by around SEK 3 million (–49 m) in one-off and restructuring costs affecting comparability.

• Home Electronics’ sales fell as a result of price pressure on the market but reported a profit after restructuring. Vol- umes were more stable compared to last year.

• The Care Electronics business unit introduced a number of new products, including two GSM telephones and re- ported strong growth throughout the year (+96 per cent).

• Sales in Business Electronics rose during the year (+15 per cent).

• Doro’s cash flow improved considerably during the second half of the year. Cash flow from operating activities amount-

ed to SEK –30 million for the year. Adjusted for restructur- ing activities and the sale of Group companies the cash flow was SEK 3 million.

• The company adopted a new organization in February, which divides product management into three business units: Home Electronics, Care Electronics and Business Electronics.

• An overheads rationalization scheme was conducted in June, which cut the Group’s overheads by around SEK 10 million. The total headcount fell from 64 to 58, excluding business disposals.

• Sale of businesses in Australia and Poland completed and replaced with independent distributor solutions.

• Jérôme Arnaud took up his position as Doro’s new CEO on

24 October. He was formerly CEO of the French business

and business unit manager for Care Electronics and Busi-

ness Electronics.

This is Doro

Doro develops and sells electronic products mainly in the telecoms sec- tor. This takes place in all categories for three separate target groups.

Home Electronics’ target group is families. The products are mainly home telephones, baby monitors and walkie-talkies.

Care Electronics concentrates more on an older target group. With a comprehensive range of products (i.e. home and mobile phones, remote controls, ring-tone amplifiers etc.) we help senior citizens to continue doing what they appreciat e despite the physical disabilities of old age.

Business Electronics are for professional users. The area covers a range of ergonomic telecoms products such as corded and cordless phones, headsets and walkie-talkies.

Doro’s products for professional use are adapted for profes- sional environments that use standard interfaces.

Common to all Doro products is that they are characterized by our expertise in customized design, technology and qual- ity control of products in Asia.

Differentiation is primarily in Doro’s functionally customized design.

Different ranges are aimed at the target groups through dif- ferent channels in order to increase their relevance:

• Home Electronics products are mainly sold by consumer electronics stores.

• Smaller advanced Care Electronics products are market- ed through consumer electronics stores, while specially adapted products for senior citizens with physical dis- abilities are sold through specialist channels.

• Business Electronics products are sold via distributors and via business-to-business retailers.

Doro has long-lasting relationships in the consumer and

business-to-business retail sectors. In addition, retailers are

now expanding rapidly in the categories concentrating on

senior citizens with physical disabilities. We create greater

relevance for the Doro brand from our target groups’ needs

through the right choice of functions and sales channels.

06 | Doro Annual Report 2007 | CEO’s statement

2007 – growth in sight

2007 was a turning point, but also a tough year for Doro, which is active on a market that continues to be difficult, mainly in home telephony. We succeeded in turning around last year’s loss of SEK 77 million to a profit of SEK 9 million thanks to a combination of restructuring and investing in products where Doro can provide value and margins.

We’ve worked hard to make Doro a company that is able to provide value for shareholders. Over the past two years we have gone from a headcount of 146 to 58 and we are work- ing with a limited number of key customers on our largest markets. We’ve restructured the business by selling the loss- making subsidiaries in Australia and Poland, but we have also tightened cost control.

A company better equipped for the future

Doro’s long-standing core business in the business unit of Home Electronics accounted for 72 per cent of the compa- ny’s total sales in 2007 and has been profitable despite the continued price pressure on the home telephony market.

The Business Electronics business unit represented 12 per cent of Doro’s sales, reported growth of 5 per cent over the year and boosted its investment in IP-related products.

A new company is in the process of developing thanks to the growing business unit of Care Electronics. Our aim is to be a more profitable company, which is better balanced between mature and growing business units.

As stated in the annual report, sales for the 2007 financial year amounted to SEK 346 million compared to SEK 433 million in 2006. Adjusted for sales of businesses sales fell by 5 per cent, while volumes actually rose by 6 per cent.

The drop is due mainly to the continued price pressure on cordless telephones in the fixed home telephony segment.

The improved profit for the business unit is an effect of the restructuring, cut in costs and sales of businesses to focus the business and a larger number of products with higher margins. The cash flow from operating activities was SEK -30 million for the year. Adjusted for restructuring activities and the sale of Group companies, the cash flow was SEK 3 million.

Growth at Care Electronics in 2007

Sales doubled at Care Electronics in 2007 to SEK 51 million (26 m) and volumes rose by 73 per cent. Sales soared by almost 160 per cent in Q4.

Care Electronics is today the business unit with the highest margins.

Even though the business was still in its infancy in 2007 with only 16 per cent of sales, growth during the year was en- couraging. We’ve increased investments and set aside more resources for the business unit.

Two new GSM telephones for senior citizens were launched in 2007, the HandlePlus 324gsm and HandleEasy 326gsm.

The launch of new, attractive products is an important step in Doro’s development and the Care Electronics business unit.

The fact is that we have created a new market by launch- ing products that encourage senior citizens to use mobile phones. The target group is expected to grow considerably over the coming years in line with an increasingly elderly population in Europe. Competitors in the segment mainly consist of smaller companies and companies of the same size as Doro, rather than household names in global mobile telephony. In order to remain competitive our pace in build- ing up this business unit will be critical. Doro, with the sup- port of an increasingly competitive range, signed contracts with specialist distributors in 2007 in Germany, Spain, Italy and Israel. This work will continue to receive top priority in 2008.

Improved control at Home Electronics and Business Electronics

Overall sales fell for Home Electronics by 17 per cent to SEK 238 million (286 m) in 2007 on the back of continued price pressure, while volumes rose by 2 per cent. Home Elec- tronics succeeded however to turn around a loss to a profit thanks to cost cuts and improved margins.

We also launched two new DECT series in 2007, the NeoBio and a series of streamlined telephones called Thin. Business Electronics became one of the first companies in the world to become TCO certified for the professional ProSound

headset. In France and the UK we launched a new, corded telephone specially adapted for hospitals in Q4. The product will be launched in the Nordic region in 2008. Sales rose by 15 per cent to SEK 41 million (35 m) and volumes by 20 per cent, mainly due to increased distribution of existing products.

Ref.1: AEDE - Europe in the making - 2. The socio economic cultures/2.5. Implications of the aging population in Europe.

CEO’s statement | Doro Annual Report 2007 | 07

I believe we are well on the way to creating a new, growth-

oriented Doro

In summary I would like to conclude my comments for 2007 by thanking all investors, partners and employees for their support during the year, in our business dealings as well as in the restructuring.

Outlook for 2008

The number of products with higher margins is increasing all the time, which, together with the annual effect of the restructured cost base, is expected to have a continued positive effect. The organic sales increase is meanwhile bein g held back by price pressure in the highly competitive telephon y segment in Care Electronics. We see that there are still challenges ahead before we have succeeded in turn- ing Doro around and begin reporting a positive cash flow.

We are continuing with our efforts to develop Care Elec- tronics as a growth area, which will successively boost the Group’s margins. We’re also investing in our core business units in Home Electronics and Business Electronics.

The strong customer base, in the form of retailers, is an im- portant platform for the company and will also in future be focused upon.

Through this strategy we believe that Doro can increase its revenues in 2008, increase gross margins and by control- ling costs, successively increase profits and start providing value for shareholders who’ve supported us throughout the restructuring period.

Significant potential for Care Electronics

Care Electronics provides telecoms and electronics products adapted for senior citizens. We are seeing greater demand for simplified electronics products that facilitate everyday life for an ageing population. The demographic development on this market will favour growth in this segment.

We’re continuing to launch products that help senior citizens communicate despite slight or more serious problems with hearing, eyesight, agility or other cognitive limitation. Doro’s products also help senior citizens live in their own homes longer.

Our wide range, combined with continued recruitment of new distributors means that we can expand geographically.

This will make 2008 a very exciting year.

Home Electronics and Business Electronics better equipped

We’ll be launching the follow-ups of our home products and investing more in Voice Over IP products during the second half of 2008, mainly for the business sector.

The streamlining carried out in recent years has cut the company’s costs. We now also have an organization bet- ter equipped to meet the demands and needs of our major Europea n customers.

Investments for a more effective business

We will invest in IT systems to achieve better product man- agement and logistics and provide customers with better service.

My commitment

Since taking over as the new CEO in October 2007 I have started to create a stronger supply culture in the company.

I believe we’re well on the way to creating a new, growth- oriente d company that will be able to provide positive re- sults. We have a growth strategy for Care Electronics and the core business units of Home Electronics and Business Electronics make up a good base in the Group. It’s my job as CEO to ensure that we have motivated employees and the resources needed to carry out the strategies mentioned.

International development

Furthermore, I will invest in international development, new distributors and in strengthening the employees’ feeling of belonging to a closely-knit, international company, where everyone at every level takes part in the practical work. My experience from my previous position as CEO of Doro in France will help me with this challenge.

Providing value has never been more important

The platform from which Doro will create value consists of an attractive brand, a relevant product range on a select market segment, long-term customer relations and cost efficienc y. There is still a lot of work to do and at Doro we are determined to provide the results and improve cash flow. It’s our challenge and our job to make sure that we do.

Jérôme Arnaud

08 | Doro Annual Report 2007 | CEO’s statement

Organization | Doro Annual Report 2007 | 09

The new Doro

An organizational change was carried out in 2007, where the three business units that the company will concentrate on in future crystallized: Care, Home and Business Electronics.

Care Electronics is the new growth area with good margins.

Further resources are being invested here and also alloca- ted from other areas. Home Electronics is responsible for the major range, which in 2007 became profitable and Business Electronics was characterised by expansion opportunities, not least of all in IP telephony. The organizational change, designed to create growth, was carried out as a part of Doro’s streamlining efforts in 2007. This has resulted in drastically reduced costs.

Hong Kong – our outpost in Asia

Doro’s Hong Kong office has received more functions and has now, in addition to being a logistics centre, also been given responsibility for project development of new products. The offic e has been located at the Hong Kong Science & Tech- nology Parks since 2006, which is close to our important technological collaborative partners and suppliers in the re- gion. Doro’s product development takes place in collaboration between Lund and Hong Kong, while all manufacturing takes place in China, Taiwan and South Korea.

Doro’s product development objectives

The following objectives characterize the typical attributes of a Doro product:

1. Design with harmony and character

Doro’s modern designs should encourage the products’ use and recognition with distinctive characteristics.

2. User-adapted functions

Doro’s products should be characterized by smart functions based on the target groups’ definite needs.

3. Total quality

Doro’s products should be developed and marketed with the highest degree of quality through a combination of material choice, form, user performance and durability.

4. Value-for-money inspiration

Doro’s products should be inspirational and make people

happy even when Doro sells on volume markets.

10 | Doro Annual Report 2007 | Strategy

Life needn’t be complicated

Many of us live far too complicated lives. With products that have functions which are never used, or which we hardly know why they are there. Doro wants to change this. Doro is therefore developing products that are user-friendly and adapted to give people a simpler everyday life. Irrespective of whether you’re at work, at home with the children or a senior citizen.

We develop products that simplify our everyday lives in three customer segments:

• Care Electronics

• Home Electronics

• Business Electronics

Our customer segments have clearly defined target groups.

Market leaders in profitable niches are the future Care Electronics represents Doro’s growth area with stronger growth and added value than the business units that have dominated Doro’s business in recent years. 2007 was a breakthrough year with strong customer and volume growth, which now make up the base of the profitable development.

Growth doubled in 2007 although it was an area that only represented fifteen per cent of Doro’s total sales and Doro is now investing resources for new product development for this target group. Doro is still a new player in the area but nevertheless has quickly gone from sales of individual products to Care Electronics being a leading player with a competitive product concept.

This work is now starting to show results and Doro is feeling the boost that Care Electronics has given the entire com- pany.

The Care Electronics business unit is now also opening up

for an expansion onto new markets with new specialized

distributors for the senior citizen market. These distribu-

Strategy | Doro Annual Report 2007 | 11 tors can work with greater added value and work in paral-

lel with Doro’s traditionally strong position with major con- sumer electronics chains, which has provided good synergy in Doro’s distribution. Doro’s products in Care Electronics are attracting attention, not least the investment in simple mobile phones for senior citizens, which are considered a product area with considerable growth potential.

We’re living in our customers’ world

Doro has a central role as a product developing and value- adding organization, mainly between Chinese suppliers and retailers primarily in the Nordic region, France and the UK.

This creates conditions that can be utilized for new markets.

Doro’s added value mainly builds on the following factors:

• Market segmentation – understanding of the end-user and retailers by focusing on defined target groups

• Own product concepts that represent a complete pro- duct range for the retailer and distributor

• Distribution channels that the suppliers don’t have acces s to

• Logistics organization between suppliers, retailers and distributors

Knowledge of the end user is important for Doro when de- signing new products. The basic knowledge of the end-user has been created by working together with various partners who have each made a contribution. Two significant part- ners are the world-leading companies Ergonomidesign and Ericsson Consumer & Enterprise Labs. Together with these two partners Doro has collected significant expertise, both about the end-users, their world and where the products can expect to be sold.

The expertise Doro has built up and the products developed for the senior citizen target group for Care Electronics is now leading to better sales.

Knowledge of the end-user

Better products Improved

sales

Better

product

develop-

ment

12 | Doro Annual Report 2007 | Care Electronics

Care Electronics

Key words: Electronic aids and ease of use Target group: Senior citizens

The senior market is showing strong growth

The UN and Eurostats’ demographic projections show that the number of Europeans over eighty years old will have doubled by 2050. A greater average life expectancy and higher income levels are also clear trends. This is Doro’s starting point for its investment in the senior market with smart, well-designed products that are easy to use for peo- ple with poor eyesight, hearing and other limitations. This might mean that a telephone has a handset that’s a little easier to hold, that there are pre-programmed buttons with pictures of the people you call more often or that it’s possible to increase the volume in the handset so that you can easily hear the person you’re talking to.

Care Electronics has had a promising start with good growth.

Sales increased from a low level in 2007 and finally rep- resented fifteen per cent of Doro’s total sales, with high margins. New distributors are being added all the time, the product portfolio is more complete and now covers more of the needs of retailers, specialist distributors and consum- ers.

Two product ranges – Easy and Plus

Doro Care Electronics designs products that are adapted to two types of segment:

Easy – simple products adapted to senior citizens’ general needs.

Plus – products specially adapted to meet the specific needs of senior citizens with more severe physical disabilities.

This division is also the basis of the segmented distribution strategy between major electronics chains on the one side and specialist distributors and retailers for the senior market on the other. The Doro Audio Plus stamp indicates a higher degree of product adaptation and creates greater added value in distribution. Many telephony products for senior citizens have a mark indicating an earpiece, but offer no guarantees. Doro has therefore developed a more qualified standard, Doro Audio Plus, which demands that products work with hearing aids and provide a high degree of volume adjustment for people without hearing aids.

New distribution strategy

Doro Care Electronics’ products are sold not only via tradi- tional home electronics chains (Easy products), but also to a greater extent via specialist retailers of electronic devices (Plus products) in order to directly reach the senior target group. Doro’s Care Electronics product portfolio was also launched on new markets in 2007, which will continue in 2008. Competition in Care Electronics is limited mainly to Care Plus, while the Care Easy category has tougher com- petition. Doro’s competition strategy builds on successively extending the product range for the respective market chan- nel.

Competitors include Geemarc Telecom from the UK, which sells telephony products adapted for the hearing impaired and Depaepe from France, which has developed products for hospital environments. Other companies with similar products include Siemens and British Telecom.

Major successes with mobile telephony for senior citizens Doro continued its successful enterprise with the Swedish design company Ergonomidesign in 2007. An example of a new product that this enterprise resulted in is the Doro Hear- Plus 317c, which is a stationary telephone specially adapted to help the hearing impaired. The telephone combines good ergonomics with a few, clear functions. Two clear buttons enable the telephone to switch between handset/earpiece and headset connected to its own socket.

Doro’s new mobile phones specially developed for a more senior target group, saw the biggest breakthrough on the market. The HandlePlus 324gsm was the first mobile phone launched and is probably the simplest mobile phone avail- able. The telephone only has five number buttons and you make your call using one of the five pre-programmed num- bers. Inbuilt speakers, large buttons, headset and the ability to hang it around your neck make it simple to use and take with you.

More “normal” mobile phones with a full complement of buttons, but simplified functionality, have also been devel- oped. Doro HandleEasy 326gsm is a simple mobile phone with a large, easy to read display, large well-defined buttons and is easy to hold.

The Doro Audio Plus stamp indicates a higher degree of product

adaptation and creates greater added value in distribution.

Care Electronics | Doro Annual Report 2007 | 13

Care Electronics is

much more than large buttons. We combine good ergonomics

and simplicity with few functions.

Jérôme Arnaud

CEO & Business Unit Manager

Doro Care Electronics

14 | Doro Annual Report 2007 | Home Electronics

Home Electronics

Key words: Smart function and design for the home Target group: Modern families

A comprehensive, IP compatible product range

Home Electronics remains Doro’s largest business unit. The majority of the range consists of home telephones (corded and cordless) and are IP compatible, i.e. compatible with the telephony services provided by internet providers. The prod- uct range also includes walkie-talkies (Personal Mobile Radio) and baby monitors.

35 million cordless phones in Western Europe

66 per cent of Home Electronics’ net sales in 2007 were attributab le to sales of cordless phones, 22 per cent to corded phones, 2 per cent to IP telephony and 10 per cent to other products. The European market for cordless telephony, which is Doro’s main market, continued to be under enormous price pressure in 2007, even if the market stabilised somewhat.

During the period 2005-2007 the price per base unit for cord- less phones has fallen 37 per cent.

According to estimates by the market research company MZA, around 35 million cordless phones were sold in West- ern Europe in 2007. This figure is based on the number of base units sold including one handset, which has significance because more than one handset can be used for the same base unit. MZA estimate that the number of handsets sold in Europe in 2007 was 58.5 million. This corresponds to a rise of 3 per cent compared to 2006. The market for cordless phones in Western Europe is expected to see sales increasing up to 2010 and then levelling off. The value of the European market for cordless phones is expected to be around EUR 1.3 billion for 2007 and expected to be relatively stable over the coming years.

According to MZA an estimated 24.7 million corded analogue telephones were sold in 2007, a drop of around 1 per cent.

The drop from consumers is however greater, around 12 per cent, because cordless telephones are replacing corded phones to a greater extent. The Western European market is expected to be worth around EUR 350 million in 2007, but both volumes and value are expected to drop by 5-7 per cent annually over the next few years.

CAT-iq coming soon

IP telephony is still being developed even though the high expectation s of recent years have not been realized. Doro Home Electronics is helping to develop the next-generation telephony standard to replace DECT. The new standard is IP-based and called CAT-iq. The development of purely IP

telephones in 2007 was for business telephones. The IP telepho ny market towards consumers is driven by operators and internet providers (ISP) or triple-play service suppliers.

Service providers offer Analogue Terminal Adaptor (ATA) boxes, often in combination with a new DECT telephone to get customers to transfer to their IP-based telephony. For con- sumers this involves no change.

All of Doro’s Home Electronics models can be used in the range in order to transfer to IP telephony. In Sweden there were, according to the Swedish National Post and Telecom Agency, around 500,000 subscribers to IP-based telephony at the end of June, which is equivalent to an increase of around 60 per cent over the year. Most of the customers (95 per cent) were households. The number of households with IP-based telephony is therefore 11 per cent.

Focusing on good relationships with important retailers Doro’s Home Electronics’ products are mainly sold on the Western European market via major electronics chains. Good relationships with important retailers are crucial for Doro’s success on the market. Part of Doro’s strategy is to therefore have a strong sales and support organization for the major consumer electronics chains in Western Europe where Doro has been established for many years and holds a strategically important position. This position was strengthened in 2007, mainly in the UK.

New telephone series with new design

Doro launched a new DECT product series, the NeoBio

in 2007. With similarities from the former Doro 500 and 600 serie s but with new characteristics, the NeoBio’s product desig n received a good reception from the market. The desig n builds on clean lines and Scandinavian design. Doro also launched a series of thin telephones in the Nordic region in 2007, which also received a good reception. The telephone’s design is built on a thin profile and modern hi-tech feeling.

Doro launched the Pink Selection in the UK in 2007 and a

new DECT telephone, Arc, which gave good sales results.

Good relationships

with important retailers are crucial for Doro’s success on the market.

Thomas Bergdahl Business unit manager Doro Home Electronics

Home Electronics | Doro Annual Report 2007 | 15

16 | Doro Annual Report 2007 | Business Electronics

Business Electronics

Key words: Ergonomic products for professional users Target group: Small and mid-size companies

Products independent of switchboards

Doro’s professional products are fully compatible, meaning that they can be used in conjunction with existing technical solutions in the workplace.

Doro’s products for professional use are divided into three groups:

• Fixed network telephony

• IP telephony (VoIP)

• Professional headsets

Ergonomic sound reduces the risk of work-related injury Doro’s “ingredient brand”– Ergonomic Sound

is receiving lots of attention. Ergonomics is today an important element in the purchasing decision in terms of professional products.

Doro is therefore taking ergonomics a step further by provid- ing ergonomic functions for sound. In doing so we prevent work-related injury risks that would otherwise be caused by monotonous exposure and long-term use.

TCO-approved headset in demand by the market Doro has gathered products for professional users of head- sets under the Doro ProSound name. Doro was the first Swedish company and second worldwide during the year to have a headset TCO approved – the Doro ProSound hs1120.

The Doro ProSound hs1120 has been designed in accord- ance with TCO Development’s strict demands for good ad- aptation to the working environment and the environment in general. In addition to TCO’s demands, the Doro ProSound hs1120 also uses Ergonomic Sound

functions that help protect against sudden high noise levels by being captured by the headset instead of damaging the user’s hearing.

The headset market is mainly dominated by the American company Plantronics and Jabra/GNnetcom. Doro ProSound is still in its infancy and market share is thus limited. Doro’s aim is to enter this market in 2008.

Hygienic telephones

In the latter part of 2007 Doro launched a niched product – the Doro aub200h (h=hygiene), which is a stationary tele- phone with specially designed buttons, magnetic handset rest, completely flat and without seams/joints. The aim is that it should be easy to clean and thereby very suitable for hospitals and public premises. This type of product is gain-

ing ground in the UK where the problem of bacterial disease and hospital infections being reported is a major problem.

Telephones and other objects used by many different people have been identified as one of the strongest contributory fac- tors as to why some diseases are more widespread.

Two ranges of IP-based business solutions

Two ranges of IP-based business solutions, the IP500 and 800 series, were introduced during the latter part of 2007.

Doro’s IP500 has been adapted for smaller companies.

Sound, data gateway and switchboard functions, known as PBX functions, provide the IP500 with effective access to the internet, with connections both via the traditional tele- phone network and internet for up to eight users.

Doro’s IP800 series is a range of IP terminals based on the SIP standard and can be adapted to various IP-based switchboards. The flagship, the Doro ip840c, is a corded VoIP telephone with a high-resolution display and it is pos- sible to present detailed information such as current news headlines direct on the display. The telephone also uses broadband codec for the best possible sound quality. Sales of the IP 500 and 800 are expected to be more notable in the results for 2008.

Terminology explained

SIP Session Initiation Protocol is a common, standardised network protocol for IP tele- phony.

VoIP Voice over Internet Protocol is internet voice transfer.

Data gateway A network node that links two separate net-

works.

Our range builds on standardized solutions, which opens up new opportunities.

Jérôme Arnaud CEO & Business unit manager Doro Business Electronics

Business Electronics | Doro Annual Report 2007 | 17

18 | Doro Annual Report 2007 | Miljö & Kvalitet

Quality assurance – a basic ingredient for success

Doro places great emphasis on quality control. Regular checks and moni- toring are the main elements in developing and manufacturing new product s. Fully functional quality control with clear internal and exter- nal processes is a condition for being able to take the next step into the produc t area.

In the past few years Doro has concentrated manufactur- ing with a limited number of suppliers that have shown to have the capacity to maintain a high, even quality. Before a contract is signed with a new manufacturer, irrespective of product area, Doro carries out a factory evaluation consist- ing of a careful check of the company and production facili- ties. Every manufactured series is then inspected with spot- checks on site at the factory by our own staff before being transported to one of Doro’s central warehouses in Malmö or Paris. Upon arrival at the warehouse the goods once again pass through quality control. In addition to these checks a more comprehensive check is made of the state of quality at all of the suppliers quarterly.

All suppliers are measured in the following areas:

• Forecast level of customer returns

• Delivery checks

• Delivery precision

• Lead times

Doro ranks and measures every manufacturer

In this way both Doro and the supplier can see what level the quality controls are at. Doro often helps with fault find- ing in the actual manufacturing process in Asia. This pro- vides a great deal of knowledge into the options available for manufacturing new products, but also the ability to improve manufacturing of existing products.

Doro insists that suppliers sign a declaration stating their social responsibility. This declaration includes a number of demands about children and forced labour, working envi- ronments, remuneration levels, working hours and the right to belong to a union of choice. Doro’s signing of the declara- tion gives the company the right to immediately cancel all links with the supplier upon breach of contract.

Doro markets and sells products whose use and recycling is covered by environmental directives, laws and regulations.

Doro’s quality and environmental manager is responsible for Doro following the laws and regulations that apply and each country has an environmental officer responsible for ensur- ing that the respective countries’ environmental legislation is followed. Among the more comprehensive directives af- fecting Doro’s business includes the EU’s Waste of Electri- cal and Electronic Equipment (“WEEE”) directive that came into force in August 2005 and the Restriction of the use of certain Hazardous Substances (“RoHS”), which came into force on 1 July 2006.

EU’s REACH directive (Registration, Evaluation, Authori- zation and Restrictions of Chemicals) will be evaluated in 2008 for implementation in 2010. The effect on Doro as an importer of finished products is limited but it will still affect our processes.

Another directive due for implementation that will affect the

company is the EUP directive (Energy Using Products). The

effect on Doro will be to ensure ecological design, produc-

tion and low energy use of battery chargers and external

power supply units.

VD har ordet | Doro Annual Report 2007 | 16

Shares

Share data (all values have been re-calculated after the reverse split) 2007 2006 2005 2004 2003 Number of shares, (thousands)

17,408 17,408 4,295 4,294 4,294

Quota value, (SEK) 1.00 5.00 5.00 5.00 5.00

EPS after tax, (SEK)

0.43 –7.59 –15.68 5,55 3.65 Cash flow per share –1.22 –0.57 –10.12 –6,70 9.50 Reported shareholders’ equity, (SEK) 2.27 1.81 7.47 21.80 16.40 Market price at 31 Dec, (SEK) 5.80 5.00 14.05 23.26 20.13

Dividend, (SEK) 0.00 0.00 0,00 0.00 0.00

P/E ratio

13.5 N/A N/A 10.0 12.5

Dividend yield (%)

N/A N/A N/A N/A N/A

1

The average number of shares in 2001 was 2,101,791 and in 2006 10,814,669

2

The P/E ratio is calculated as the market price on the closing date divided by the EPS after tax.

3

The dividend yield is calculated by dividing the dividend by the market price on the closing date.

Doro has been listed on the OMX Nordic Exchange Stockholm since 1993. There are 17,407,631 shares.

No new share issues were carried out by Doro in 2007.

Doro will not pay any dividends for 2007. The shares quota value is SEK 1 (5). There are no outstanding convertibles or synthetic options.

Doro’s share price climbed in 2007 by 16 per cent (fell by 34). Doro’s market value on 31 December 2007 was SEK 101 million (87).

The AGM was held in Lund on 25 April 2007.

Share issues

The parent company’s share capital has changed in recent year through new share issues as follows:

Increase in Amount No. of Issue share capital paid Year Issue new shares price

(SEK m) (SEK m) 1998 Directed issue 2,740,260 18.48 2.7 50.6

1998 New issue 1:7 1,212,894 27.00 1.2 32.7

2001 Directed issue 11,764,705 8.50 11.8 100.0

2005 New issue 7,141 1.00 0.0 0.0

2005 Reverse split 5:1 –17,180,000

2006 New issue 3:1 12,885,000 6.00 64.4 71.2 2006 Offset share issue 227,631 7.66 1.1 1.5

1

Issue prices not recalculated for new issues and reverse split

Major shareholdings as at 31 December 2007

No. of % of No. of % of The 10 largest shareholders shares shares votes votes

Originat AB 2,600,000 14.9 2,600,000 14.9

Doro Intressenter AB 1,647,058 9.5 1,647,058 9.5

Gusgus AB 848,250 4.9 848,250 4.9

Johand AB 848,250 4.9 848,250 4.9

Runand AB 848,249 4.9 848,249 4.9

Alted AB 825,751 4.7 825,751 4.7

Erik A i Malmö AB 816,250 4.7 816,250 4.7

Dirbal AB 800,000 4.6 800,000 4.6

Venture Handels & Investment AB 800,000 4.6 800,000 4.6 Tedde Jeansson, SR 691,355 4.0 691,355 4.0

Sub-total 10,725,163 61.6 10,725,163 61.6

Ownership structure as at 31 December 2007

No. of As % of all No. of As % of shareholders shareholders shares held all shares

Under 501 shares 2,403 72.7 242,864 1.4

501–1000 shares 421 12.7 348,641 2.0

1001–5000 shares 331 10.0 817,892 4.7

5001–10,000 shares 62 1.9 468,616 2.6

10,001–20,000 shares 36 1.1 555,962 3.1

20,001–50,000 shares 23 0.7 794,751 4.5

50,001–100,000 shares 8 0.2 547,800 3.1

Over 100,000 shares 21 0.6 13,631,105 78.3

Total 3,305 100.0% 17,407,631 100.0%

The number of shareholders has fallen from 3,774 to 3,305. Of the total shares held, about 12% (10) are held by foreign shareholders and about 1%

(4) by institutional holders.

Share performance 2003–2007

2003 2004 2005 2006 2007

0 10 20 30 40 50

Aktien OMX Stockholm_PI

Doro

© OMX AB

100 200 300 400 500

2007

JAN FEB MAR APR MAJ JUN JUL AUG SEP OKT NOV DEC

4 5 6 7 8 9

Omsatt antal aktier 1000−tal (inkl.efteranm.) Aktien

OMX Stockholm_PI

Doro

© OMX AB

Share performance and sales 2007

© OMX AB

© OMX AB

20 | Doro Annual Report 2007 | Shares

The shares

Doro’s shares Total number of shares

traded per week (including aftermarket), ‘000

2007

Directors’ report

Doro AB is a publicly owned limited company (hereafter referred to as Doro). The company’s registered office is in Lund, Sweden under the corporate registration number 556161-9429. The address of the head office is Magistratsvägen 10, Lund (post code 226 43), Sweden. Doro has operations in France, Hong Kong, Norway, the UK and Sweden. The structure of the Group is outlined in Note 14.

Business activities. Doro markets a broad and innovative range of telecoms and consumer electronics products, primarily for the European market. Doro provides user-friendly products of high quality and modern design for consumers and businesses.

Doro’s product range is divided into three Business Units: Home Electronics (cordless digital telephones, corded telephones, telephone answering machines, baby monitors etc.), Business Electronics (headsets and office telephones) and Care Electron- ics (various specialist products for senior citizens).

Global conditions. Doro operates mainly in the rapidly changing telephony products market for consumers and businesses in Europe. Production mainly takes place in China. The company protects its products by owning the tools and through active participation in the design, development and quality assurance processes.

Large purchase volumes make Doro an attractive customer and mean competitive costs per unit for the company in terms of development and production. Large purchase volumes also strengthen Doro’s ability to negotiate with subcontractors.

Past year in summary:

– the company is now reporting a slight profit following years of losses

– the loss-making subsidiary in Australia was sold – new distribution solution in Poland

– slightly higher volumes but continued price pressure – new business unit organization for greater customer focus – strong sales trend for the new Care Electronics business

unit

– renewed GSM range

– continued negative cash flow, partly due to payments for the restructuring scheme

Profits. Doro recorded sales of SEK 346 million (433 m) in 2007, a drop of 20 per cent compared to last year. Adjusted for sales of companies, sales fell by 5 per cent, while volumes rose by 6 per cent.

The market for the main product, cordless phones, hasn’t changed in volume terms compared with last year. This market picture should be compared with strong volume growth in 2004 and 2005. The selling prices of DECT telephones have continued to fall and there is a general price pressure on the market. A certain degree of stabilisation was seen in Q4.

The profit before tax and financial items was SEK 9.2 mil- lion (-77 m). The headcount fell by 22 to 58 (80), which led to fewer overheads ahead of 2008. The year was burdened with one-off costs and restructuring costs of SEK 3 million (49 m).

Doro sold the previously wholly-owned subsidiary Doro Australia Ltd Pty on 16 May and the company had a positive impact on Doro’s results of SEK 3 million up until that date.

The results have been included in the Group’s calculations. The capital loss that arose from the sale was covered by the liquida- tion of the restructuring reserve and thereby had no affect on the Group’s results.

The Group’s profit after tax was SEK 8 million (–95 m) for the year. A recalculation has been carried out for the Group’s deferred tax assets, which has resulted in a tax cost of SEK1 million.

New organization for greater focus on products and customers.

A new organization was formed on 21 December 2006 for sharper focus on customers and customized products. During Q1 2007 a reorganization was completed, dividing the business into three business units:

– Home Electronics – Business Electronics – Care Electronics

The new organization means development times for new products can be cut further. In addition, the Group moved away from a national organization during the year and now has a Key Account Management-based sales organization with shared service centres in Lund and Paris and purchasing logistics in Hong Kong.

Business units. Doro carries out business activities through three business units, which are currently divided as: Home Electron- ics, which is mainly home telephony and represented 72 per cent (83) of sales for the year, Business Electronics, mainly office telephony, 12 per cent (10) of sales and Care Electronics, specialising in telecoms and electronics products for senior citizens, 16 per cent (7) of sales.

Home Electronics, which previously represented the majority of Doro’s losses, has improved its profit margins during the year.

The continued price fall led to sales dropping by 17 per cent to SEK 238 million (286 m), while volumes rose by 2 per cent compared to last year. Overall, the business area turned around a profit in 2007 as a direct result of the cost savings schemes and improved margins.

Doro launched the new NeoBio series in September and in Q4 sales started to take off. The new series builds on a more modern technological platform, but the legacy from Doro’s former series can be still seen in the design. The new thin-lined DECT telephones, th50 and th55 were well received by the market with their clean, streamlined designs. This series has so far only been launched in the Nordic region.

Business Electronics has continued to grow due to improved distribution of its existing products. Sales increased by 16 per cent to SEK 41 million (35 m) and volumes by 20 per cent.

A new series of corded office telephones was launched in the UK and France in Q4. These will also be launched in the Nordic region in 2008.

for Doro AB, corporate registration number 556161-9429.

Directors’ report | Doro Annual Report 2007 | 21

Care Electronics doubled its sales in 2007 to SEK 51 million (26 m), while volumes rose by 73 per cent. Care Electronics, which develops and distributes telecoms and electronics products specially adapted for senior citizens, has seen an accelerated sales trend over the year.

The sales increase was mainly an effect of the introduction of a new GSM telephone, the HandleEasy 326gsm, with a func- tional design for senior citizens.

Care Electronics is a very attractive area for the future, where Doro’s position on the market over the year has been strengthened by new product launches specially adapted for the needs of senior citizens.

Regions. Doro’s largest markets are France (40 per cent of sales), the Nordic region (35 per cent) and the UK (10 per cent). Doro also sells via distributors on other selected markets (15 per cent).

Organization and staff. The overall objectives of the Group in staff issues are to recruit, train and retain skilled, committed staff. Annual career assessment talks are an important part of this work.

The Group management team was reorganized in 2007 and now consists of five individuals. Due to the new organization some staff have been given new areas of responsibility.

The average number of employees was 61 (87).

Changes to the board and Group management. Bo Kastensson was appointed as the new chairman of the board at the AGM on 25 April. Former board member Anders Bülow left the board and Jonas Mårtensson was elected as a new board member.

Rune Torbjörnsen left his position on the board when the new CEO was appointed on 24 October. The board now consists of Bo Kastensson, Anders Berg, Jonas Mårtensson and Tomas Persson.

Jérôme Arnaud was appointed as the new CEO by the board on 24 October. He is the former CEO of Doro France. He is also the head of the Business Electronics and Care Electronics busi- ness areas.

The board’s proposal for guidelines for remuneration to senior executives for 2008 mainly mean that salaries and other remu- neration terms for management must be in line with market norms. In addition to a basic salary, management can also receive a flexible remuneration, which should have a pre-determined ceiling and be based on the results in relation to profit targets (and in certain cases other key figures). The maximum cost of bonus payments should not exceed SEK 5 million. The total cost for fixed and flexible remuneration should be decided annually at a sum that includes the company’s entire remuneration costs, which allow for senior executives to allocate parts of their fixed and flexible salaries to other benefits, such as pensions. Pension plans for management should mainly be defined contribution plans.

Upon dismissal by the company senior executives might be eligible for a redundancy payment, which should have a pre- determined ceiling. If the employee resigns his/her position then no redundancy payment will be paid.

The board will have the right to deviate from the guidelines if there is considered to be just cause.

Organizational structure. Doro has carried out an efficiency plan in recent years to create a lower cost level with improved efficiency and increased distribution capacity. Part of this focus involved the sale of Doro Australia Ltd Pty. The buyer was Westan PTY

LTD, Melbourne, Australia, which acquired all the shares on 16 May and will thereby also be Doro’s distributor in Australia and New Zealand. Assets in Doro Atlantel Sp.Zo.o were sold on 3 April to TM Distribution Sp.zo.o who will be a distributor for Doro’s products in Poland. The Danish and Finnish companies were sold during the year to the benefit of local distributors.

There is currently a merger underway in Sweden between Doro Nordic AB and Doro AB.

Product development and development costs. Doro carries out various projects together with different external partners for product development and design. Most of the costs are usually absorbed by the manufacturing partner. In many cases these costs are part of Doro’s acquisition values of the products. Doro employs design companies from various countries and these costs are either fixed or variable. Doro also sometimes buys technology from various external companies. The Group’s devel- opment costs for 2007 were SEK 5 million (5m). Doro also invests in various moulding tools to protect the design of products.

These are activated until such time as the first product is ready for delivery. The development work is then written off over one to two years depending on the type of product.

At the end of 2007 Doro had no patents registered by the company but it does have the right to use various patents regu- lated by agreements. Doro has registered the brands Doro, Air- borne, Audioline and Atlantel. A number of product names, patterns and figures are also protected.

Sales per product area and primary segment. Doro operates in the following product areas: cordless telephones, corded telephones (including telephone answering machines, caller-id products), GSM telephones and other consumer-related electronics products.

DECT telephones are the largest product area, accounting for 51 per cent (49) of total sales followed by corded telephones with more than 29 per cent (27) of total sales.

Performance in the various segments is reported in Note 2.

Investments. Investments are made in design, moulding tools, control equipment, inventory, computers and software systems.

Investments amounted to SEK 5 million (3m). See accounting principles.

Legal processes. Doro is involved in two disputes. A detailed account is given in Note 21.

In the most important dispute Doro made a claim totalling SEK 106 million upon Sojitz (Nissho Iwai) in Japan. Doro lost in the first instance in July 2005. The court’s decision has been appealed against and the next decision is expected to take another year.

A dispute about stock has been won but not finalised. No new disputes arose in 2007.

The environment. Doro has no business activities that require environmental licences.

Doro does not own any production units. Comprehensive co-operation takes place with a number of factories where pro- duction services are purchased. Whilst surveying factories, various environmental demands are set. An increasing number of factories are working with different environmental programmes and intend to apply for ISO 14000 certificates.

Quality. Regular, quarterly, follow-ups of suppliers’ quality take place with the help of the Doro score card. This card emphasises on the suppliers’ factories processes and escalation point in terms of reported quality shortfalls and how they are remedied.

22 | Doro Annual Report 2007 | Directors’ report

An evaluation takes place on site of possible new suppliers for all quality related processes, while a first evaluation linked to Doro’s “Code of Supplier Conduct” is carried out. Product qual- ity is also checked continually from individual batches.

Regulations. Doro’s “Quality and Regulatory Manager” checks on the company’s products that they at least meet the prevailing legal requirements on actual markets, technical specification and environmentally related demands.

Ethics. Doro uses third-parties to verify that suppliers are meet- ing their respective countries’ legislation and Doro’s demands about employment terms and conditions. This is also carried out on an ongoing basis at regular intervals at all factories.

Cash flow, investments and financial position. The cash flow from operating activities was SEK 7 million (12 m) in Q4. Cash flow for the year from operating activities was SEK -30 million (-6 m), mainly as a result of the restructuring scheme, which had a negative impact on the profits by SEK 24 million, and which was paid in 2007. Major items included are salary pay- ments for dismissed personnel (around SEK 6 million), consul- tancy costs (around SEK 4 million), cancelled contracts (around SEK 3 million) and costs for moving (around SEK 2 million).

The sale of Doro’s subsidiary in Australia meant a drop in the consolidated working capital of around SEK 16 million without the corresponding positive effect in the cash flow from operating activities. The sale is reported as part of the Group’s investment activities as a positive sum of SEK 9.4 million. In total this involves a negative impact on cash flow of around SEK 7 million.

Investments for the year amounted to SEK 5 million (1 m).

At the end of the period Doro had liquid assets of SEK 8 million, and unutilised credit facilities of SEK 52 million, giving the company a total of SEK 60 million at its disposal on 31 December 2007. The equity/assets ratio was 24 per cent at year-end, compared with 17 per cent at the start of the year.

Dividend and financial targets. The board set a results target at the time of the new share issue in 2006 for an operating margin of a minimum five per cent over a business cycle. The previous targets of a maximum debt/equity ratio of 1.3 (interest-bearing debt/equity) remain unchanged.

The organic expansion will be funded from internally provided funds, while new share issues will finance larger acquisitions.

Financial overview. Reports are presented in the various financial reports with quarterly developments:

– income statement – balance sheet – cash flow statement – shareholders’ equity – quarterly summary – five-year summary

Quarterly reports. The board has decided on the following dates to publish quarterly reports in 2008:

January–March 2008: 6 May January–June 2008: 20 August January–September 2008: 23 October

The quarterly reports will be published on Doro’s website:

www.doro.com

Parent company. In addition to Group management and finance staff, the parent company, Doro AB, provides service functions

for the rest of the Group. Marketing and product development are co-ordinated by the parent company, while the product and quality department monitors design and tooling issues as well as quality assurance for deliveries. Purchasing and logistics staff are responsible for material flows within the Group.

Doro AB reported sales of SEK 29 million (27m). The loss after financial items was SEK 31 million (-88).

Doro AB is responsible for the majority of the subsidiaries’

financing. Net debt is SEK 46 million (30m). Shareholders’

equity totals SEK 45 million (73m).

The board and its work schedule. Doro’s board consisted at the beginning of the year of five members elected by the EGM on 12 September 2006. One of the main shareholders (Mellby Gård Group) was represented by a single board member, Anders Bülow.

Anders Berg and Tomas Persson were re-elected as board mem- bers and Jonas Mårtensson was elected as a new board member.

CEO Rune Torbjörnsen was included as an ordinary board member and the CFO is co-opted to the board as its secretary.

Other company executives take part in board meetings in a reporting capacity.

Rune Torbjörnsen left the board in conjunction with the change of CEO on 24 October. Doro now has four ordinary board members.

The board held 7 (13) meetings during the 2007 financial year and the items on the agenda are set out below. A number of tele-conferences were held in addition to those planned.

Attendances were very good.

January: Approval of the annual accounts and a review with auditors

April meeting 1: Quarterly report

April meeting 2: Statutory meeting. Signing on behalf of the company by the board and two board members together (of whom one shall be the board chairman or the CEO)

June: Review of the cost-efficiency scheme August: Quarterly report

October: Quarterly report and change of CEO

December: Budget for 2008 and new credit agreements.

Information is sent out about one week before each meeting.

Each month the previous month’s results are sent out along with comments. The board continually addresses subjects such as the business situation, budget, periodical accounts and cost- efficiency. Five board members are planned for 2008. Doro did not have any formal committees in 2007.

Nominations. Nominations for the board are co-ordinated by an informal nominations committee comprising of representatives of the main owners, Originat, Doro Intressenter, Alted, Dirbal and Venture together with a representative from Nordea, whereby a proposal for a new board is submitted. A formal nominations committee is not therefore considered necessary.

Auditing. The scope and focus of auditing are planned and decided by Anders Berg, Bo Kastensson and Jonas Mårtensson.

The scope and focus of the audit are presented by the company’s auditor. An interim audit is carried out based on the quarterly report from 30 September and the result of the audit is reported at a meeting with the chairman of the board and senior execu- tives, both after the interim audit and after the final audit. At the February board meeting the company’s auditors present the results of their audit of the Group’s internal systems and the annual accounts for the entire board.

Directors’ report | Doro Annual Report 2007 | 23