Annual Report 2017 Thin Film Electronics ASA

Contents

USA - San Jose NFC Innovation Center

2581 Junction Avenue San Jose, CA 95134 Phone: +1 408 503 7300

Follow Thinfilm www.ThinfilmNFC.com

Norway - Oslo Corporate Headquarters

Henrik Ibsens Gate 100 PO Box 2911 Solli 0255 Oslo Phone: +47 22 42 45 00 Email: info@thinfilmnfc.com

United Kingdom - London Sales Office

2 Eastbourne Terrace Paddington London W2 6LG Phone: +44 203 865 6346

China - Shanghai Supply Chain and Sales Office 柏摩电子（上海）有限公司

Room 1802, 18 Floor Bao An Building 800 Dong Fang Road Shanghai, China 200122 Phone: +86 21 5116 7107 Fax: +86 21 5116 7116

Singapore Sales Office

71 Robinson Road #14-01 Singapore 068895

Sweden - Linköping Development Office

Westmansgatan 27B 582 16 Linköping Phone: +46 13 460 2400

Germany Sales Office

WeWork Axel-Springer-Platz 3, 20355 Hamburg, Germany

USA - San Francisco Sales and Software Office

WeWork 655 Montgomery Street 7th Floor San Francisco, CA 94111 Phone: +1 408 503 7300

Table of Contents

Message from the CEO

2017 Highlights

About Thinfilm and Printed Electronics

Report from the Board of Directors

Consolidated Statements of Comprehensive Income

Consolidated Statements of Financial Position

Consolidated Statements of Changes in Equity

Consolidated Cash Flow Statements

Notes to the Consolidated Financial Statements

Profit and Loss Statements Thinfilm ASA

Balance Sheet Thinfilm ASA

Cash Flow Statements Thinfilm ASA

Notes to the Annual Financial Statements Thinfilm ASA

Corporate Social Responsibility (CSR) Statement

Responsibility Statement

Auditor’s Report

Corporate Governance

Articles of Association

Board of Directors

Executive Management

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Message from the CEO

Thinfilm is changing the face of mobile marketing.

In 2017, we began to fulfill our vision of enabling

the Internet of Everything by pioneering the use of

roll-based manufacturing to create printed integrated

circuits. These flexible, ultra-thin devices offer unique

advantages, and the manufacturing process enables

the scaled production of electronic components –

such as Near Field Communication (NFC) tags – into

the billions of units annually. While our leadership in

novel manufacturing is a key to making smart products

ubiquitous, Thinfilm is also the only company in the

industry offering a complete end-to-end solution for

NFC mobile marketing. Our CNECT™ cloud-based

software platform allows brands and marketers to

manage the NFC tags, deliver unique digital content

and experiences, and track consumer interactions

in real-time. In order to foster the widest possible

application of NFC, Thinfilm customers have the

choice to use our proprietary PDPS (printed dopant

polysilicon) NFC tags, or Thinfilm-programmed

traditional silicon NFC tags.

The elegance of NFC mobile marketing is that it

derives value from consumer behavior that is already

happening. Research shows that 80% of consumers

are already using their smartphones at the time of

purchase while shopping in-store, and Thinfilm is

leveraging the NFC technology that is already built

into every new smartphone. Between Android and

iOS-based platforms, there are an estimated two

billion NFC-compatible phones around the globe.

This number will continue to grow as older phones

are replaced with newer models.

The ongoing mass adoption of contactless payment

systems continues to drive consumer “tapping”

behavior. This behavior initially started with credit

cards but quickly spread to smartphones as Apple

Pay and Google Pay gained in popularity. As mobile

payment platforms become more mainstream,

NFC mobile marketing will gain traction, especially

after Apple’s announcement of inclusion of NFC

compatibility beyond just payments with the latest

version of iOS. The release of iOS 11 in 2017 spiked

interest in iPhone-dominated markets, including

North America, Western Europe, Japan, and Australia.

This is in addition to the Android-centric markets

throughout the rest of the world that have enjoyed

broader NFC functionality for years. Now, regardless

of the mobile operating system (OS), Thinfilm’s

solutions allow brands to establish direct connections

with consumers and control the dialogue without

being subject to influence from search engines and

online marketplaces.

Brands are always looking for better ways to engage

customers and build relationships. NFC mobile

marketing provides this opportunity by giving brands

a way to reach customers at privileged moments

that other marketing channels cannot provide, both

in the aisle while shopping and at-home during a

Dear Shareholders,

5Message from the CEO

product’s consumption phase. Always with an eye on

brand image, agencies and brand managers value

Thinfilm’s customizable, discreet packaging that

cannot be matched by other vehicles as it improves

the overall user experience and brand impression.

CNECT™ version 2.0 is expected to launch in April. It

offers pre-packaged NFC applications that empower

brands to “surprise and delight” customers with

relevant experiences that enhance loyalty and drive

repeat purchases. Smart marketers know that a pull

strategy, through which customers and prospects

opt-in, is always more trusted and effective than

push-based marketing efforts. In sum, NFC mobile

marketing is a compelling complement to awareness

advertising and helps brands close the sale by

delivering the right message to customers at the

right time. Leading brands do business with Thinfilm

to pursue exciting new marketing opportunities and

gain valuable insights into customer behavior that,

until recently, were simply not accessible.

During the past year, Thinfilm gained a reputation

as a leader in NFC mobile marketing among brands

as well as industry organizations. Thinfilm won the

large majority of the publicly announced NFC mobile

marketing projects in 2017 and had over 27 in-market

deployments. Thinfilm also won two awards from

the Mobile Marketing Association (MMA). One was

an MMA Smarties™ award in the “Internet of Things

– Products in the Market” category for our work

with Coronado Brewing Co. as they launched a new

product. The other, an “MMA Impact Award”, was

given to Thinfilm’s Matt Bright, Sr. Director Product &

Technical Marketing, in recognition of his leadership

in advancing the MMA’s IoT (Internet of Things)

initiatives. Matt is also the co-author of NFC Mobile

Marketing for Dummies, part of the well-known Wiley

“dummies” series of instruction manuals. Thinfilm was

awarded these prestigious accolades in competition

with large digital agencies, media companies, and

many household brands.

The CNECT software platform is helping to fuel

adoption for marketing purposes and interest by

brands. First-party data from user-initiated interactions

gathered by CNECT provides insights not available

through other channels and helps fill the gap between

online marketing and offline behavior. Our customers

include wineries, craft beer producers, tobacco

companies, and major brands within OTC pharma,

cosmetics, nutrition products, and the broader

consumer packaged goods (CPG) industry. They have

discovered useful, unexpected insights, including usage

frequency logged by time-of-day and day-of-week. The

data also revealed the viral nature of these campaigns as

well as the longevity of a campaign beyond the

initial target audience or flight. Insights also include

information on distribution, including confirmation

that a product has reached store shelves and

how long it takes for direct mail campaigns to be

Version 2.0 of the CNECT platform is expected to launch in April and will feature expanded functionality and enhanced UI/UX.

Marge Ang (left), Sr. Director Marketing, accepts the MMA Smarties™ “Internet of Things – Products in the Market” Award on behalf of Thinfilm; Matt Bright (right), Sr. Director Product & Technical Marketing, receives an “MMA Impact Award” for his leadership in advancing the MMA’s IoT initiatives.

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canvassed. Campaigns can also serve as a monitoring

mechanism to determine if field representatives are

doing their jobs and deploying material as instructed.

These actionable insights can help brands modify