Annual Report
2010/11
At the heart of power electronics

LEM | Annual Report 2010/11

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LEM | Annual Report 2010/11

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Table of Contents
LEM at a Glance . . ............................................................................ 4
Foreword . . ..................................................................................... 6
Business Report ........................................................................... 8
Values and Principles .................................................................... 11
Corporate Governance .................................................................. 13
Financial Results – Summary and Comment ............................ 23
LEM Group .................................................................................. 27
Consolidated Statement of Financial Position ................................ 28
Consolidated Income Statement . . .................................................. 29
Consolidated Statement of Comprehensive Income ....................... 30
Consolidated Statement of Changes in Equity .. .............................. 30
Consolidated Cash Flow Statement ............................................... 31
Accounting Policies . . ..................................................................... 32
Notes to the Consolidated Financial Statements ............................ 39
Auditors Report . . ........................................................................... 54
LEM Holding SA .......................................................................... 55
Balance Sheet . . ............................................................................. 56
Income Statement . . ....................................................................... 57
Notes to the Financial Statements ................................................. 59
Proposed Appropriation of Retained Earnings . . .............................. 64
Auditors report . . ............................................................................ 65
Information for Investors ........................................................... 66
Group Subsidiaries . . ................................................................... 67
Period 1 April 2010, to 31 March 2011

LEM at a Glance
LEM – At the heart of power electronics
LEM is a focused manufacturer and a global market leader.
Its core products, transducers for measuring electricalparameters like current and voltage, are used in a broad
range of applications. Although these devices are not ­v isible
to the outside world, they are vital for application f­ unctionality
and the benefits provided to the end users. Starting withproducts for locomotives in the seventies, LEM expanded
into a vast area of industrial applications, including variable
speed drives for motors and power supplies for industrial
applications. Today, LEM’s current and voltage transducers
are also used in AC/DC con­v erters, uninterrupted power­s upply systems for computers as well as in new innovative
energy applications like microturbines and wind and solar
power generation. In addition, new opportunities have beendeveloped in the automotive market for battery m­ anagement
and electrical motor controls for steering and braking systems. This evolution underscores the company’s e­ xceptional
skills in adapting to rapidly changing industrial trends, suchas miniaturization, higher performance levels and a greater
degree of application, integration and complexity.

LEM has the strongest brand recognition in its markets. Its
products – commonly called “LEMs” – are at the heart ofmany power electronics applications. LEM’s strategy is to
exploit the intrinsic strengths of its core business anddevelop opportunities in new markets with new applications.
At the same time, LEM is committed to maintaining ­c ustomer
focus and operational excellence by running cost-effective
and service-oriented production platforms. Profitable
growth is a key objective.

Worldwide presence
LEM is a global organization with production plants in
Geneva (Switzerland), Copenhagen (Denmark), Machida(Japan) and Beijing (China). The company has sales offices
close to its main clients’ locations and offers seamless­s ervice around the globe.

Production Centers (PDCs)
Geneva, Switzerland
Copenhagen, Denmark
Beijing, China
Tokyo, Japan
Adaptation Centers
Milwaukee, USA
Tver, Russia

Sales Offices
Geneva, Switzerland
Milwaukee, Columbus OH, Amherst NH,
Arvada CO, Los Angeles CA, USA
Tver, Moscow, Russia
Beijing, Shanghai, Shenzhen, Xian, China
Tokyo, Japan
Braine-le-Comte, Belgium
Frankfurt, Germany
Paris, France
Skelmersdale, UK
Padova, Italy
Vienna, Austria
Barcelona, Spain
Pune, India
Agents/Distributors

LEM | Annual Report 2010/11

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Key figures 2010/11
In CHF millions

2008/09

2009/102010/11

Sales
Operational EBIT
In % of sales
EBIT
Net profit of the year

196.8
29.2
14.8%
33.8
23.9

185.5
25.8
13.9%
17.5
10.5

296.2
60.4
20.4%
55.0
39.6

Shareholder’s equity
Net financial assets (+) / liabilities (–)
Market capitalization (per 31 March)

83.5
27.9
172.4

83.4
29.8
391.0

96.9
26.6
655.5

Sales over 5 years per segment

Regional sales breakdown 2010/11

In CHF millions

300

Rest of the World
2%

275
250
225
200

Asia
33%

175
150

Europe
50%

125
100
75
50

North America
15%

25
0
06/07

07/08

08/09

09/10

10/11

Industrial Segment
Automotive Segment

Share price development LEM Holding SA (LEHN) compared to SPI
700

CHF

600

500

400

300

200

LEHN

100

SPI

0
4/1/06

10/1/06

4/1/07

10/1/07

4/1/08

10/1/08

4/1/09

10/1/09

4/1/1010/1/10Source: Bloomberg

LEM | Annual Report 2010/11

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4/30/11Foreword
Dear Shareholders,
LEM has recovered well from the financial crisis. Overall, we saw a new record year at LEM, driven
by a substantial volume increase, the ambitious cost management program initiated during the financial crisis and our organizational changes.
We have benefitted from the general economic recovery that began in Q2 2009/10 as well as ourleading market position. In the first two quarters of the financial year, we saw orders outperform
expectations as a result of customers wanting to increase their stock and assure supply of LEM products in a tight market. This sudden demand increase initially challenged our capacity management.
However, we reacted quickly by adapting our supply chain, strengthening our organization and investing in additional machine capacity. Sales were up by close to 80% in the first six months of the financial year compared to the prior year. According to our internal performance indicators, we successfully increased capacity while maintaining our uncompromising product and service quality levels.
In the last quarter of the financial year, our volume of incoming orders returned to normal levels. We
closed the financial year with total sales of CHF 296.2 million, bookings of CHF 336.9 million and an
operating EBIT of CHF 60.4 million. The improved tax structure had a positive impact on our profitability. Net profit for the year reached CHF 39.6 million.
Focus on developing our markets as a pure play company
We have benefitted from our strategic pillars: concentrating on the transducer market, lean organization and global reach. As the leading provider of critical current and voltage measuring components,
we continue to develop our operations to benefit from the market trends that have boosted our business in the past: the increasing demand for energy (in particular renewable energy), the need for reliable energy, the focus on energy efficiency, and the constantly growing demand for mobility (especially in environmentally friendly means of transport).
In addition to growing in our strategic key markets, we plan to further strengthen our competitiveedge in two ways: first, we intend to focus more intensely on innovation to improve product performance and to penetrate new markets with new solutions, and second, we will enhance our costleadership through operational excellence, lean management and increased sourcing in low cost
countries.
New business opportunities
Renewable energies have gained momentum on account of increased environmental consciousness
and the growing concern about nuclear energy. We have acquired a strong market position in renewable applications.
The solar and wind sectors are making up an increasing share of our total sales, a trend that is
expected to impact LEM’s overall profile going forward. In renewable energies, however, we continue
to anticipate increased market volatility, mainly due to changing government policies, particularly inthe solar sector. In addition, we are well positioned in the green car market (hybrid electric and electric vehicles).
New CEO and extension of the Board
As of 1 July 2010 and following a smooth transition process, François Gabella succeeded Paul van
Iseghem as the CEO of LEM. François Gabella’s first challenge was to develop the organization inorder to satisfy the fast growing market demand. To achieve this, we strengthened the management
team. Jean-Marc Peccoux was appointed Vice President of R&D, while Luc Colombel has been fully
dedicated to the Automotive Segment, reflecting its growing importance. Hans-Dieter Huber assumed
responsibility for the entire Industrial Segment. The senior management team is completed with Julius
Renk, CFO, and Simon Siggen, Vice President Operations.

LEM | Annual Report 2010/11

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We also expanded our Board of Directors during the past financial year with the arrival of Ilan Cohen,
President and CEO of Servotronix Motion Systems Ltd. Ilan Cohen brings a wide range of experiencein business management and innovation in power electronics to the Board.
Proposals to the Annual Shareholder’s Meeting
We communicated a new, consistent dividend policy in February 2011, which will serve as a reliableguidance for shareholder return over the coming years. As a consequence of our strong balance
sheet and the confident outlook for further profitable growth, LEM will target to return significantly
more than 50% of the consolidated net profit for the year to our shareholders. Adopting this newpolicy, the Board of Directors proposes at the forthcoming Annual Shareholders Meeting on 1 July
2011 the payment of an ordinary dividend of CHF 40 per share.
The Board of Directors proposes to elect Andreas Hürlimann (M Sc EE ETH) as a new member. After
more than ten years in industry, followed by several years as a managing partner at the global technology and management consulting firm Arthur D. Little as well as managing director at SpencerStuart board and executive talent advisory, Andreas Hürlimann works as an independent entrepreneur
and advisor. Based on his experience and expertise in strategic leadership and talent management
he will be able to make important contributions to the Board.
In September 2010, we launched a share buy-back program for up to CHF 15 million through a second trading line. LEM has successfully bought back 10’000 shares as part of this program for a total
amount of CHF 4.0 million as of 31 March 2011. The Board of Directors decided to close the sharebuy-back program. The Board of Directors proposes to cancel the repurchased shares. Going forward the company will focus on the new dividend policy as a means to return funds to shareholders.
Thanks
LEM had a record year! This would not have been achievable without the commitment of LEM employees worldwide. We would like to thank all of them for their enthusiasm during this exciting year.
At the same time we express our deep empathy for all our employees and business partners in Japan
who are going through a very difficult period.
Finally, our thanks go out to our customers for their enduring trust in our products and services aswell as to our shareholders, who have shown steadfast support during this past year.

Felix Bagdasarjanz
Chairman of the Board of Directors

François Gabella
President and CEO

LEM | Annual Report 2010/11

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Business Report
The year continued on the very successful year-end

Additional stock option plan costs amounted to CHF 5.4 million,

2009/10 and resulted in a new record year

directly linked to the strong performance of the LEM share

Following the second quarter of 2009/10, which signaled theprice from CHF 340 per share to CHF 570 per share. The

end of the crisis, the positive trend continued throughout

effective Group tax rate was reduced from 34.9% to 21.3%.

seven consecutive growth quarters. Despite adverse foreign

Net profit for the year was CHF 39.6 million (+276%).

exchange effects, we are reporting a record result driven bya substantial volume increase combined with the aggressive

The Industrial Segment

cost management program we initiated during the financial

Sales in the Industrial Segment were CHF 272.7 million – acrisis, which has proven to be effective.

year-on-year increase of 60%. All markets with the exceptionof traction, which remained stable, grew strongly in 2010/11.

LEM’s capacity was initially challenged by the sudden demand

Operational EBIT reached CHF 57.6 million, which is anincrease. Despite supply shortages at the beginning of theincrease of 115% compared to the previous year.

financial year, we reacted quickly by adapting our supply
chain, reinforcing our organization and adding new p­ roduction

The Industry market experienced a very successful financial

capacities. As a result, our year-on-year output increased by

year. Sales increased by 75 % compared to the year before.

almost 80% in the first six months of the financial year.

The main drivers in the Industry market were electric motor
drives and renewable energies. In electric motor drives, ­business

Due to the general shortage in the electronic components

in Europe was strong and we were especially successful inmarkets and the sudden recovery in market demand, our cus-

China and in India. In renewable applications, the solar sector

tomers sought to increase their stocks and placed significant

is thriving, and we have experienced spectacular growth inorders with longer lead times. This explains our high book-

Italy and Germany. Nevertheless, we have to bear in mind thatto-bill ratio in the first three quarters. There have been signs

solar is a volatile business since demand is affected by ­p oliticalof market normalization since December 2010, which explainsfactors such as feed-in tariffs. In the long term, we expect

the lower volume of orders in the fourth quarter. Still, the year

solid growth with China and the US to follow the dynamics in

ended with a strong order book.

Europe. The wind sector is also strong.

2010/11

The Traction market has been stable over the past year. We

In CHF millions

Q1

Q2

Q3

Q4

Total

benefitted from our leading position in the growing Chinese
market as several projects were delayed in Europe and theOrders received
Sales
Book-to-bill
Operational EBIT
EBIT
Net profit

93.6
66.8
1.40
13.8
13.4
8.2

90.8
75.0
1.21
16.6
16.5
11.6

83.6
77.0
1.09
15.7
11.1
7.5

68.9
77.4
0.89
14.3
14.0
12.3

336.9
296.2
1.14
60.4
55.0
39.6

Sales jumped 59.7% to CHF 296.2 million compared to the

US due to budget cuts.
The Energy and Automation market experienced strong
growth with sales increasing by 61% compared to last year.
Typical products include transducers used in factory ­a utomationsuch as Wi-LEM, our wireless local energy meter product,and our battery monitoring product for standby industrial­b atteries used in critical applications.

previous year. With CHF 336.9 million in bookings (+55%), thebook-to-bill-ratio was at 1.14, indicating strong, but ­s tabilizing

The Automotive Segment

growth. As announced in the first half-year 2010/11 report,

The 2010/11 financial year saw a turning point for the Auto-measures have been taken to strengthen the structure of our

motive Segment. We reached a durable level of profitability

organization to manage current and future growth. ­Nevertheless,mainly thanks to the 60% sales growth and to our improved

sales and general & administrative spending (SG&A) were kept

cost base due to the transfer of production to China. The

tight, rising by only 20.6%. SG&A as a proportion of sales

automotive organization has been strengthened and focused

declined from 29.5% in 2009/10 to 22.2% in 2010/11.

on the segment activities, on management and operative­l evels. In the conventional car battery management business,

LEM initiated an ambitious innovation strategy in the second

which still represents the majority of our automotive business,quarter, which resulted in a 18% increase in R&D spending

we expect further growth without major new investments,

to 14.0 million.

particularly in the US, but also in Asia and Europe. In thepromising green car market (hybrid electric and electric —Our efficient cost management combined with the growthvehicles), the majority of future green car platforms visible atmomentum resulted in exceptional profitability. The grossworld car shows are designed with LEM transducers and we

margin reached 42.6% despite adverse foreign exchange rate

are ready to capture this growth opportunity.

effects. Operational EBIT grew even stronger than sales andreached CHF 60.4 million (+ 134%), giving proof to our opera­
tional leverage. Our operational EBIT margin increased to
20.4%, above our target range of 15 to 20%.

LEM | Annual Report 2010/11

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The right strategy

The broad diversity of nationalities and cultures across ourOur business strategy and the four strategic drivers for ourGroup is a great asset, which not only drives our ­c ompetitivenessbusiness proved their value again in 2010/11. And our target

but also brings us closer to our customers around the world.

markets remain robust. The needs for:_ _ more energy, especially renewable energy

Employee development_ _ reliable energy_ _ better energy efficiency_ _ more mobility, especially energy-friendly solutions

Number of employees at the end of
the financial year

With a share of roughly 50% of the transducer market, we

Full-time employees
Temporary employees
Apprentices
Total

intend to strengthen our leading position in critical currents

In full-time equivalents (FTEs)

continue to drive our business. In addition, with growing­c oncern about nuclear energy, pressure to save energy andto develop environmentally friendly alternatives will increase.

31.3.2011

31.3.2010

1’215
89
12
1’316

970
37
11
1’018

and voltage measuring components worldwide.
Situation of LEM Japan
Cost and capacity management

The events in Japan came as a shock to the Group. Although

Demand has increased substantially as the economy has

none of our employees at our Machida factory were impacted

recovered in the wake of the financial crisis. Consequently, in

physically by the earthquake, the tragic events affected us all

2010/11 we focused on growth and capacity as we had toon a personal level. We grieve with the families of the victims

adapt to a sharp increase in sales. Nevertheless, we continued

and our hearts go out to all of our colleagues, business ­p artners

to guarantee the same uncompromising product quality.

and clients in Japan. We are deeply impressed by their calmand professional attitude during this trying time.

LEM’s strength is its ability to react quickly to market
demands. We absorbed the rise in orders by proactively

Neither our operations nor those of our main suppliers were­m anaging our supply chain and increasing our capacity. We

directly affected in the immediate aftermath of the events. We

hired staff and invested in machinery. We also intensified our

expect further power supply and logistics disturbances in thecooperation with our suppliers during this demanding period.

coming months and have taken measures to mitigate them.

Our new manufacturing center in Beijing, which went online in

Outlook

2009, proved to be a sound investment. China is our biggest

The drivers that have made LEM successful will remain strong

production site and has absorbed the majority of our growthin 2011/12 and beyond. The lasting energy price increases

in the financial year. Also, China has become one of our mostand the recent nuclear accident will accelerate the demand

important markets with sales of CHF 50.5 million (+62%).

for more efficient utilization of energy, with a greater portion
thereof coming from renewable sources. With our broad

LEM has always maintained very high environmental­p roduct range and our global organization, LEM is optimally­s tandards and demands this same level of engagement frompositioned to benefit from these long-term trends. We will

our suppliers. All of our production sites are ISO 14000

therefore continue to reinforce our position by being innova-­c ertified in order to reduce our environmental footprint.

tive and by strengthening our cost leadership thanks to operational excellence, economies of scale and low-cost manu-

Investments in Research and Development

facturing. We will also continue to develop our flexibility in

LEM is the proven leader in the area of measuring current andorder to quickly adapt to market demand fluctuations.

voltage. Nevertheless we want to intensify our efforts to bringinnovative products in terms of accuracy, reliability and cost

We are confident that LEM’s long-term growth will remaincompetitiveness to the market. Also, we will continue to pene­

strong in future. However, following a spectacular growth oftrate new applications where transducers have the potential

60% in 2010/11, we expect the situation to slow down in early

to enhance system performance. We are working on a range

2011/12 before growth resumes.

of new products with good prospects. For example, in May
2011 LEM has launched the CTSR family of transducers,

As currency fluctuations continue to impact our financial per-specific­a lly designed to meet the latest safety standards

formance, we will also work on reducing our exposure by

issued for solar installations and inverters.

increasing our natural hedge as well as continuing to use
financial instruments.

Employees
LEM’s culture is based on achievement, innovation and theability to drive change in a truly global organization. Rapid
expansion of operations in China exemplifies how these­c ommitments are being translated into concrete careeradvancement and development for local managers. We offer
similar career opportunities in our worldwide sites.

LEM | Annual Report 2010/11

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Windmills Modern onshore and offshore
wind energy turbines drive a generator
that converts the mechanical energy
from the turning blades into electricity.
LEM transducers contribute in two
ways to improve safety and efficiency ofwind turbines.
1. To ensure the generators work most efficiently, electricmotors turn the nacelle and the rotor into the wind.
In addition, an active power control system adjusts the rotor
blades within their longitudinal axis. LEM’s transducers in the
power converters continuously measure the current in orderto optimally position the turbine.

2. The electricity produced needs to be fed safely into
the power grid, meaning it needs to be supplied with continuous power at a controlled frequency and voltage. LEM’s
current transducers enable optimal control and protection of
the AC/DC (Alternating Current/Direct Current) converter tofeed the power grid.

LEM | Annual Report 2010/11

10Values and Principles
LEM’s core values and principles
It is vital for all of LEM to share common values and working
principles. All employees understand what LEM wants toachieve so that everyone works together for the same­p urpose.
These values link all LEM employees together and make usa team. They are the common beliefs we share. They are
the spirit and intent of everything we do at LEM.
There are six core values, each one guiding us throughout
all our activities.
_ _ We are customer driven_ _ We operate with integrity_ _ We value teamwork_ _ We commit_ _ We strive for excellence_ _ We lead innovation
We are customer driven
We succeed by exceeding our customer expectations witha “yes customer” attitude. All our activities are driven by thedesire to provide best quality service to our customers. We
aim to listen to, anticipate and respond to our customers’
needs. For this reason, we collaborate closely with our customers and form true relationships. We target “customer
delight.”
We operate with integrity
Basic ethical behavior and integrity in business relationships
determine the essence of all our actions. As a company andas individuals, we do the right things right and never compromise our values and principles. We honor our agreements and are honest in our communications.
Our relationships with co workers, customers, suppliers,
partners and the investor community are based on openness and fairness.

We value teamwork
LEM forms a worldwide community. Close collaboration andnetworking across functions, departments and cultures iscritical for the success of the company. To cooperate, weneed to be open and honest and willing to share and trust
each other. Accountability is a key factor to our success.
We are committed to a workplace where individuals aretreated fairly and with respect, where all employees havethe opportunity to expand their skills and accomplishments
are recognized. Teamwork is more than just working
together, it is bringing out the best of everyone’s strengths.
We commit
We set our goals high because we know we can reach them.
We honor these goals as promises to our customers, ourshareholders and ourselves. Our continued success depends
on keeping our promises and taking responsibility for all our
actions. Success is measured by the results we produce incustomer satisfaction, sales, profitability, value creation to
our shareholders and the scope of opportunities we provide
for our employees.
We strive for excellence
No matter how good our products, services, processes andresults, we are dedicated to making them better. We aim forthe highest standards of quality for our customers. By
approaching our daily work with a passion for perfection,
avoiding incidents by managing the risks of our activities,
taking initiatives and a desire to learn and share that learning with colleagues, we all can make a difference.
We lead innovation
Innovation is the cornerstone of our success, and our future
depends on it. Innovation will ensure that we have attractive
products for our markets, and a steady supply of new technologies, products, applications and customers. We aim tobe the leaders in our industry and not the followers.

LEM | Annual Report 2010/11

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Solar Inverters In solar panels, the generated electricity can be used for autonomous installations, remote from the
distribution grid, which charge a battery.
This is commonly referred to as an “offgrid system”. In contrast, the grid-connected system feeds energy back into
the grid. In photovoltaic panels, transducers control the energy flow to thegrid and are used for ensuring thesafety of equipment and people.
Thousands of solar panels are required to build a solar plant,
and the performance of the overall installation has to be monitored in order to maximize its efficiency. The inverter used forthe conversion of the power to the grid will ensure a part ofthis efficiency by tracking if the Maximum Power Point (MMP)
for the generated current and voltage is reached for the total
installation.
In order to be the most efficient, the current has to be measured. This will allow adapting the parameters to adjust the
Maximum Power Point for the generated current and voltage,
but also to detect any defective solar panel.

LEM | Annual Report 2010/11

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Corporate Governance
The following information complies with the Corporate Gover­nance Directive of the SIX Swiss Exchange (SIX) and thedisclosure rules of the Swiss Code of Obligations. In orderto enhance the clarity of this chapter, reference is made toother parts of the Annual Report and our website (www.lem.
com). Key elements are contained in the Articles of Incorporation revised 1 October 2007.
1 Group structure and shareholders
Group structure
LEM Holding SA is domiciled at 8, chemin des Aulx in
CH-1228 Plan-les-Ouates, Geneva. LEM’s registered sharesare listed on the main segment of the SIX Swiss Exchange(LEHN, security no. 2 242 762; ISIN 0022427626). On 31
March 2011, the market capitalization was CHF 655.5 million.
LEM Group is structured into the Industrial Segment andthe Automotive Segment. Appropriate segment reporting
pursuant to IFRS is contained on pages 38 of the notes tothe consolidated financial statements. All companies in LEM
Group are listed under “scope of consolidation” on page 53,
with their respective company names, registered offices,
share capitals and the relevant percentages of shares held.
There are no other listed companies in the scope of consolidation.
Significant shareholders
On 31 March 2011, the following shareholders held 3% ormore of the share capital and voting rights:
Werner O. Weber und WEMACO Invest AG,
in Zollikon / Zug, Switzerland
Ruth Wertheimer, in Kfar, Israel, through7-Industries Holding B.V.,
in Amsterdam, ­N etherlands
Sarasin Investmentfonds AG,
in Basel, ­S witzerland
Erwin Studer and Joraem de Chavonay SA,
in Zollikon / Zug, Switzerland
Amerprise Financial Inc., in Minneapolis, US,
through Threadneedle Asset Management­H olding Ltd, in London, United Kingdom
Montanaro Asset Management Ltd, London,
United Kingdom
Impax Asset Management Ltd, United Kingdom

29.8%
12.6%

8.4%
7.2%
5.2%

3.7%
3.2%

2 Capital structure
Capital and shares
The nominal value of the share capital of LEM Holding SA
is CHF 575’000, which is divided into 1’150’000 fully ­p aid-up
registered shares with a par value of CHF 0.50 each. There
are no shares with preferred voting rights. All shareholders
are entitled to the same dividends.
Detailed information about the capital structure in the last
three years is shown in LEM Holding statutory accounts on
page 59.
There are no restrictions on the transfer of shares. In order
to be registered in the share register, each shareholder shalldeclare that he holds the shares for his own account.
On 31 March 2011, LEM Holding SA held 18’247 treasury
shares, of which 10’000 shares are held in the frame workof the share buy-back with the perspective of cancellation.
Authorized and conditional capital
There is no authorized or conditional capital, nor are there
any profit-sharing certificates or participation in certificatesor any convertible bonds outstanding.
Information on the Performance Share Plan and the stock
option plans is provided below under Section 5, “Compensations and Shareholdings”, under the note “Stock options
plans, Performance Share Plan” on page 47 and in the notes
to the LEM Statutory Accounts on page 63.
3 The Board of Directors
Election, terms of office and cross-involvement
The Board of Directors is comprised of at least three­m embers who are individually elected at the ordinary Shareholders’ Meeting for a mandate of one year, which is renewable up to an age limit of 70. The Board constitutes itself
and the Chairman is nominated by the Board.
At the ordinary Shareholders’ Meeting on 25 June 2010,
Felix Bagdasarjanz, Peter Rutishauser, Anton Lauber andUeli Wampfler were reelected as members of the Board of
Directors and Ilan Cohen was newly elected as member ofthe Board of Directors. Felix Bagdasarjanz maintained the
Chairmanship. In November 2010 Peter Rutishauser was
nominated by the Board of Directors to become its Vice
Chairman. All members of the Board are non-executive andhave at no time been part of the executive management ofLEM. Furthermore, they have no significant business connec­
tions with the LEM Group.

There are no known shareholder agreements between individual shareholders.
Cross-shareholdings
LEM has no interlocking shareholding with other joint-stockcompanies.

LEM | Annual Report 2010/11

13

The Board of Directors
Name
Felix Bagdasarjanz
Anton LauberPeter Rutishauser
Ueli Wampfler
Ilan Cohen

Nationality
Swiss
Swiss
Swiss
Swiss
Israeli

Born in
1945
1951
1956
1950
1956

Position
ChairmanMemberVice Chairman
MemberMember

Entry
2002
2004
2003
2007
2010

Committees
Member NCC
Chairman NCC
Chairman AC
Member AC–

AC = Audit Committee
NCC = Nomination and Compensation Committee

Members of the Board of Directors: education, professional background and other notable activities(Absence of information on other notable activities indicates that there are none of relevance.)

Felix Bagdasarjanz

Education
Dr. of Electrical Engineering, ETH Zurich
Professional background
Since 2002, independent business consultant
1999–2002, CEO of ESEC and Member of the Executive Board of Unaxis
1997–1999, Member of the Executive Board of ABB Switzerland
1992–1997, Managing Director ABB Drives AG/ABB Industrie AG
Other notable activities_ _Member of the Board of Schneeberger Holding AG, Roggwil/Bern_ _Vice President Commission for Technology and Innovation, CTI, Funding Area President
Engineering Sciences

Anton Lauber

Education
Certified Machinery Engineer, Technical University Brugg-WindischMBA studies at University of Applied Sciences, Lucerne
IMD and University of St. Gallen: Studies for top managers in SMEs
Professional background
Since 2009, Delegate of the Board and President Division Components / Schurter Group, Lucerne
Since 1998, Member of the Board of Directors of Schurter Holding AG, Lucerne, and its group companies
Since 1993, CEO and Delegate of the Board of Directors of Schurter AG, Lucerne
Until 1988, Managing Director of Generatorenfabrik ABB AG, Baden
Other notable activities_ _Vice Chairman of the Board of Directors of Bossard Holding AG, Zug_ _Member of the Board of Directors of Beutler Nova AG, Gettnau, and Aquametro AG, Therwil_ _President of the council of Hochschule Lucerne / University of Applied Sciences and Arts

Peter Rutishauser

Education
Dr. sc. nat., ETH
Lic. oec., HSG
Professional background
Since 1989, independent businessman
Other notable activities_ _Delegate of the Board of Directors of Equatis AG, Zurich_ _Member of the Board of Directors of Glatz AG, Frauenfeld; Pavatex AG, Fribourg, and Outlyne
Sports AG, Landquart_ _Chairman of the Board of Directors of Trisport AG, Hünenberg; Humanis AG, Zurich, and WUPA
Holding AG, Frauenfeld

LEM | Annual Report 2010/11

14

Ueli Wampfler

Education
Lic. oec., University of Zurich
Certified auditor
Professional background
Since 2004, Founder and Senior Partner of Wampfler & Partner AG, Zurich
1998–2004, Director STG Schweizerische Treuhandgesellschaft, Zurich
1974–1998, STG Coopers & Lybrand, Zurich (Partner since 1991)
Other notable activities_ _Member of the Boards of Directors of Swisa Holding AG, Cham; PH Partner Holding AG, Cham; Merbag Holding AG, Zug; Mercedes-Benz Automobil AG, Schlieren; Merbag Immobilien AG, Schlieren;
Caspar Finanz AG, Zug (Traco Power Group); OFRAG Vertriebsgesellschaft, Lupfig; Fuchs-Movesa AG,
Lupfig; Rebew AG, Zurich; Frigosuisse AG, Möhlin

Ilan Cohen

Education
Ph.D. Control System, Ecole Polytechnique de Bruxelles, Belgium
MSEE, CALTECH Pasadena, US
M.Sc. and BSEE Electro-mechanical engineer, Ecole Polytechnique de Bruxelles, Belgium
Professional background
Since 2010, President of Servotronix Motion System Ltd. and Servotronix Motion Control Ltd., Israel
2008–2009, General Manager of Kollmorgen Industrial & Commercial ­E ngineered Solutions Ltd.
(part of Danaher Group)
1997–2008, President and CEO of Kollmorgen Servotronix Ltd.
1987, Founder of Servotronix Ltd.
1982–1987, Fond National Recherche Scientifique, Belgium
1983–1990, Associate professor at University of Tel-Aviv, Israel
Other notable activities_ _Board member of Servotronix Motion Control Ltd. and Servotronix Motion ­S ystems Ltd., Teamar
Ltd., Ginergia Invest Ltd. and GoalTime Ltd., Israel_ _Led the establishment of Cleantech Incubator (2012) and Engineering School (2014) for IDC University, Israel

Internal organizational structure
The Board of Directors meets as often as necessary, but fiveto six annual meetings are planned in advance. In the completed financial year, four full-day meetings and one half-day
meeting were held. Additionally, several ad hoc conference
calls took place during the year. The meetings usually takeplace at the company’s headquarters. The Chairman, after
consultation with the CEO, determines the agenda for the
Board meetings. The members of the Board of Directors can
ask for additional items to be included. The Board members
receive supporting documents beforehand which allows fora good preparation of the meeting. As a rule the CEO attends
the meetings of the Board of Directors ­w ithout having a rightto vote, and for most of the agenda items the CFO also
attends. Depending on the issues, other members of Senior
Management participate in the meetings in order to respondto specific questions. Decisions can be taken by the Board
if at least half of the Directors are ­p resent, and a simple
majority of them is sufficient. In the event of deadlock, theChairman has the casting vote. Minutes of the meetings
including decisions taken are prepared by the o­ utside Secretary of the Board and distributed to the m­ embers of theBoard, the CEO and the CFO.
The Board of Directors reflects, in its working procedures,the efficiency and effectiveness of the teamwork as well as
its interaction with the management of the company on aregular basis. Regular feedbacksessions at the end of ameeting provide valuable inputs for the continuous improvement of the Board’s coherence and leadership.

Definition of areas of responsibility
The Board of Directors delegates the management of thecompany to the CEO to the fullest extent permitted by the
Swiss Code of Obligations. The Board of Directors reviews
and assesses at least on an annual basis and takes ­d ecisions
in the following areas:_ _ Review and approval of the strategy, business plan, annual
business objectives and budget for the LEM Group.
_ _ Approval of creation/closing of any subsidiary andpurchase­/ sale of any interest in any company or entry into
any merger or joint venture agreement.
_ _ Appointing/dismissing of the Senior Management.
_ _ Monitoring the ethical and legal behavior of LEM.
_ _ Reviewing of human resources management, especially coworker satisfaction and management development andlegal, intellectual property, social and environmental aspects.
Information and control systems of the Board of
Directors vis-à-vis Management
The Board of Directors ensures that it receives sufficient
information from the Senior Management to perform its
supervisory duty and to make the necessary decisions.
The Board of Directors obtains the information required toperform its duties through several means:_ _ The Board of Directors receives monthly and quarterly
reports on the current development of the business.
_ _ Informal meetings and teleconferences are held as required
between the Chairman and the CEO as well as between
the Chairman and individual members of the Board.
_ _ The Committees meet at regular intervals and exchangedetailed information with the Management.
LEM | Annual Report 2010/1115

_ _ The Board receives detailed information to each agenda
item one week before the board meeting.
_ _ At least once a year a session is held in the Board meeting
including all Senior Managers.
Business risk management
In compliance with Art. 663b of the Swiss Code of Obligations, LEM is using a standardized procedure to analyze its
business risks. LEM’s risk management covers all types ofrisk: financial, operational and strategic – up to the externalbusiness environment, compliance and reputational aspects.
The Senior Management conducts an annual risk analysis.
The results and consecutive action plans are thereafter presented to and formally approved by the Board of Directors.
The risk management approach follows five steps: In a firststep, potential hazards are evaluated and a consensual list
with 10–15 main hazards is set up. In a second step, eachhazard is assessed by a multiplication of probability withfrequency. Step two results in a risk map which visualizes
LEM’s potential risk environment. In step three an action
plan is put in place to reduce the risks. The hazards thereafter are revalued a second time, taking into consideration
the action plans. In step four the action plan is validated andthereafter monitored on a monthly basis (step five).
Internal control system
In compliance with Art. 728 a/b of the Swiss Code of Obligations, LEM has put in place an internal control system.
Starting from the material positions in the financial result of
the Annual Report, the important underlying processes andprocess owners have been identified. For each process, key
risks that could lead to errors in the financial reporting havebeen identified. For each key risk, key controls have been
defined and responsibilities assigned to assure effective compliance and documentation of the key controls. The process
has been presented to and approved by the Audit Committee.
Looking forward, the process owners will perform an annual
process review whereby identified weaknesses shall be continuously improved and key risks and controls shall be
updated. Based on the input of the process owners the CFO
prepares an annual report on the internal control system which
is presented to and discussed with the Audit Committee.
Committees
Two standing committees support the Board of Directors.
They are comprised of two non-executive and independent
members of the Board of Directors. They meet whenevernecessary but at least twice a year.
_ _ The primary objective of the Audit Committee (AC) is toprovide the Board of Directors with effective support infinancial matters, in particular the selection and supervisionof the external auditor, assessment of the effectiveness,compliance and clarity of the Group financial reporting and
LEM | Annual Report 2010/11

16

the assessment and preparation of the financial reports tothe shareholders. Furthermore, it reviews critical ­a ccounting
policies, financial control mechanisms and compliance withcorresponding laws and regulations as well as the ­development
and continuous improvement of the internal control system.
If required, the external Group auditors are invited to participate at the meeting. The AC prepares proposals to be
decided by the Board of Directors. In the completed financial year five half-day meetings were held.
_ _ The Nomination and Compensation Committee (NCC)
deals with succession, recruitment and compensation of
the members of the Board of Directors and the Senior
Management. It ensures and monitors the personnel
development plan and adequate succession planning forthe middle and top management. It reviews and updates
the performance-based compensation system for the
Senior Management. The NCC prepares proposals to be
decided by the Board of Directors. In the completed ­f inancial
year three half-day meetings and two telephone conferences were held.

4 Senior Management
The Senior Management was comprised of the following members as of 31 March 2011:
François Gabella

Education MsC Microtechnics EPFL, Executive MBA IMDNationality Swiss

Function President and CEO LEM Group

Born in 1958

With LEM since 2010
Previous companies and positions_ _Tesa SA, CEO_ _Areva, SVP_ _ABB Power Transformers, Business Area Manager

Julius Renk

Education Lic. oec., HSG, CEMS Master in Int’l Management

Nationality German

Function CFO

Born in 1970

With LEM since 2009
Previous companies and positions_ _IP France SA (RTL Group), CFO_ _AB Enzymes GmbH, CFO

Hans-Dieter Huber

Education Engineer Berufsakademie Mannheim

Nationality German

Function Vice President, Industrial

Born in 1959

With LEM since 1995
Previous functions Business Development Manager
Previous companies and positions_ _ABB Drives Germany R&D Team Manager

Luc Colombel

Education Engineer ESILEC

Nationality French

Function Vice President, Automotive

Born in 1959

With LEM since 1996
Previous functions Business Development Manager
Previous companies and positions_ _Arcelor Group, Strategic Development and Sales Manager

Simon Siggen

Education Engineer EPFL, Master in Logistics

Nationality Swiss

Function Vice President, Operations

Born in 1967

With LEM since 2002
Previous functions Operations Manager
Previous companies and positions_ _Leclanché, Business segment Director

Jean-Marc Peccoux

Education Engineer ENSAM, Master of Economics University of Besançon

Nationality French

Function Vice President, R&D

Born in 1966

With LEM since 2002
Previous functions Corporate Quality Manager
Previous companies and positions_ _Valeo, Quality Director, R&D Program Manager_ _Schlumberger, R&D Project Manager

LEM | Annual Report 2010/11

17

Green cars In green cars’ (hybrid electricand electric cars) motor drives, LEM
measures the current of the battery packto ensure the battery pack’s reliability
and performance. LEM’s products are
considered to be the reference in thisgrowing market thanks to the family of
products, which were developed during
the past years.
Ten years ago LEM started to develop a new generation of
products that are now designed-in into green cars to belaunched from 2012. LEM’s transducers help to improve considerably the performance of the battery management – i.e.
the capacity of battery charge and the weight of battery – andthus of the vehicles while reducing the cost of the energy
storage.
Today, battery management cost in a hybrid vehicle is the
major cause for the higher cost of these cars compared to a
traditional vehicle. This explains why car manufacturers invest
in the new generation of products designed to reduce cost.

LEM | Annual Report 2010/11

18

The CEO François Gabella is Member of the Board of ­D irectorsof Cicor SA, Boudry. None of the other members of the
Senior Management have other activities in governing or
supervisory bodies, any official functions or political posts
nor any permanent management functions for important
Swiss and foreign interest groups.
Management contracts
There are no management contracts with companies or individuals outside the LEM Group.
5 Compensation and shareholdings
5.1 Board of Directors
General principles for compensation of non-executive
directors
Compensation for the Board of Directors is approved by the
Board of Directors based on recommendations by the Nomination & Compensation Committee (NCC). The remuneration of the Board of Directors is a fixed cash payment andis reviewed on an annual basis. The remuneration compensates for the personal responsibility and exposure as a nonexecutive member of the Board of Directors and all work
related to the Board of Directors membership. There will be
no additional variable compensation nor any participationin an equity-based compensation plan. Each member of theBord of Directors shall be a shareholder of LEM. The numberof shares to be acquired on the market within a period of
three years after joining the board shall reach a value ofapproximately three annual fixed compensations. Tradingwith LEM shares has to respect the insider regulation of LEM.
Discontinued plans
In April 2006 and in April 2007 the Board of Directors issued
the stock option plans SOP 5 and SOP 6 for the senior management and including the non-executive directors. In May
2008 the Board of Directors decided to discontinue the participation of non-executive directors in any equity-based
compensation plan. SOP 5 has expired on 31 March 2011;
SOP 6 will expire on 31 March 2012.
Remuneration of non-executive directors
The Board of Directors has decided to adopt a remuneration scheme with a fixed fee paid in cash in the amount of
CHF 180’000 for the Chairman, CHF 120’000 for the Vice
Chairman and CHF 80’000 for a member. Committee activity will be compensated with CHF 30’000 for the Committee’s chairman and with CHF 20’000 for its members. In
financial year 2010/11, no compensation was paid to former
members of the Board of Directors.
For more details on financial compensation, see note 20 “Stock
option plans, Performance Share Plan” on page 47 and thenotes of LEM Holding Statutory Accounts on page 63.

5.2 Senior Management
General principles for compensation of Senior ­Management
Remunerations for the Senior Management are approved by
the Board of Directors based on recommendations by the
CEO and the Nomination and Compensation Committee.
The remuneration of the CEO is proposed by the Chairman
for approval by the Board of Directors. The remuneration of
the Senior Management is reviewed on an annual basis.
The total compensation for the Senior Management consistsof three elements:
1. Base salary
2. Bonus according to the LEM Incentive System (LIS)
3. Nonwage compensation
The total annual compensation is part of the manager’s contract and does not contain any discretional elements. The
target setting process for the LEM Incentive System (LIS) ispart of the LEM performance management and is carriedout on an annual basis.
Base salary of Senior Management
LEM’s base salary orients itself around a mid-point of available and comparable benchmark data of industrial companies with a plus and minus band of 20%. In case that available
benchmark data allow for a comparison of total remuneration(base salary plus bonus) the comparison around a mid-point
is made assuming a value of half of the maximum bonus
according to our target-setting philosophy. Base salaries are
fixed amounts of cash paid monthly. We review base salaries
annually to ensure they remain competitive, comparing themwith the benchmark data. The benchmark data is taken from
Mercer Compensation Data Base.
Bonus of Senior Management: LEM Incentive System
The LEM Incentive System (LIS) consists of two parts:_ _ LIS part 1: performance related to the individual’s function
and responsibility_ _ LIS part 2: performance related to financial results of LEM
group
For the LIS part 1, annual objectives are agreed between
the manager and his superior at the beginning of each business year and a final review is performed at the end of theyear. The objectives as well as the performance evaluation
are approved by the next level superior. The final approvalis given by the Nomination and Compensation Committee(NCC) of the Board of Directors, in the case of the CFO by
the Audit Committee (AC). Objectives and performance
evaluation of the CEO are agreed between the CEO and the
Chairman of the Board of Directors and they are approvedby the Board of Directors. The maximum value of the annual
bonus related to LIS part 1 is 35% of the base salary for the
Senior Management, 30% for the CFO and 60% for the CEO.

LEM | Annual Report 2010/11

19

Typical categories for objectives include:__ Personal performance criteria including personal development_ _ Project-related objectives and milestones_ _ Objectives related to the process and team performance_ _ Objectives related to quality_ _ Objectives related to people and team development_ _ Objectives related to stakeholder satisfaction_ _ Financial objectives
The number of selected objectives per annum shall be­l imited in order to keep a focus on the key challenges of theyear. At the same time, the number of objectives has to belarge enough in order to allow the manager to reach a fairlevel of bonus rewarding his efforts even under changed
business conditions. Since the degree of achievement of
set objectives has to be evaluated at the end of the period,a clear understanding of the metric to be applied has to beestablished at the time of target setting and kept constantfor the whole period. For every criterion, the curve between
minimum and maximum bonus level has to be defined. The
point of 50% bonus shall be set at the level of an ambitious
but achievable objective.
In order to guarantee consistency of the target-setting process within LEM group, the key objectives for the year will
be defined by the CEO together with the Management Committee at the beginning of each fiscal year.

LEM | Annual Report 2010/11

20

The LIS part 2 is an annual bonus which is based on the performance of LEM evaluated over a period of three consecutive years. The performance criterion is the cumulated economic value added (EVA) achieved over these three years.
The definition of the EVA objective takes place at the beginning of year one and the evaluation of the performance atthe end of year three. Once the forward-looking EVA objective is defined, the EVA objective remains unchanged overthe period of three-year. Every year, the new three-year
objective for the cumulated EVA is defined and kept
unchanged over the respective three-year period. The
bonus payment takes place every year based on the comparison between the EVA objective defined three-year
before and the performance achieved at the end of thethree-year period. The new forward-looking EVA objective
is approved annually by the Board of Directors based on a
proposal by the NCC and following the annual closing. The
proposal of the new objective has to be presented in thecontext of the historical performance, the actual three-year
financial plan of LEM and the shareholders’ expectations
expressed in the share price development.
The maximum value of the annual bonus related to LIS part2 is 25% of the base salary for the Senior Management, 20%
for the CFO and 40% for the CEO.
The bonus payments are made in cash and in the first q­ uarterof the new fiscal year based on the annual accounts and thepersonal performance review conducted by the direct ­s uperior
and approved by the next-level superior.

Nonwage compensation of Senior Management
Nonwage compensations include in particular pension plans(retirement benefits). LEM has a policy to limit nonwage
compensations to what may be required for the job holder
as a work instrument to fulfill his/her function according to
generally accepted local usages.
5.3 Pensions and health care plans
Pension benefits at LEM are designed to provide and contribute to a reasonable level of retirement income reflecting
the number of years of service with LEM and also to help in
the case of disability or death.
As a general policy, the level of pension benefits provided
to employees is country specific and is influenced by local
market practice and regulations.
The pension and health care benefits in the main countries
where LEM operates are described in more detail below.
LEM in Switzerland
The LEM pension plan operates a defined contribution planthat provides retirement benefits and risk insurance for deathand disability. Under IFRS, this plan is considered as a defined
benefit plan. The insured salary is based on LPP Swiss law
and is without limitation on the amount. The pension fund isfunded by contributions from the company and the insured
employees. The average contribution for the employee is 40%
and 60% for the company. You can find more information in
the notes under retirement benefit obligations.
LEM does not provide health care benefits to its employees
in Switzerland.
LEM in China
The pension plan is a government plan. Both the company
and the employee pay a certain percentage of a fixedamount for the insurance each month.
The health care plan is both government and company
funded.
LEM in Japan
Only the government plan prevails.
The labor insurance (injury or disease regarding work) andhealth insurance is for all employees.
The regular employees are included in the pension ­p rograms.
There is a special pension fund for Directors.
LEM in Germany
In addition to the legally required pension and health insurances, the company pays into an insurance pension planfor employees.

5.4 Discontinued plans
During May 2009, the Board of Directors decided not toissue further equity- or option-based compensation plans.
For the financial year 2010/11 two option and one shareparticipation plans were still outstanding. One of the outstanding option plans and the share participation plan has
been closed 31 March 2011; the second outstanding option
plan will be closed 31 March 2012.
For more information on the previous Performance Share Planand on the previous Stock option plans, see note 20 “Stock
option plans, Performance Share Plan“ on page 47 and thenotes of LEM Holding Statutory Accounts on page 63. For
more details on financial compensation, see note 20 “Stock
option plans, Performance Share Plan“ on page 47 and thenotes of LEM Holding Statutory Accounts on page 63.
Compensation of former members
In financial year 2010/11, a compensation of CHF 1’660
thousand was paid to two former members of the Senior
Management.
6 Shareholders’ participation rights
The rules on shareholders’ participation rights are outlinedin the Articles of Incorporation. The rules for the conveningof Shareholders’ Meetings, the participation rights and the
majority rules for decisions are all following the Swiss law.
The complete Articles of Incorporation can be downloaded
from the Investor Relations pages on the Internet pagewww.lem.com.
Voting rights and representation restrictions andinscription in the share register
There are no limitations on voting rights for shareholders
who are entered into the shareholders’ register with voting
rights. Anyone purchasing registered shares is registeredby the Board of Directors in the share register on request
as a shareholder with voting rights, provided he expressly
declares that the shares have been bought and will be held
for his own account.
Each shareholder may be represented by the representativeof the Company, by the independent representative, or by athird party who need not be a shareholder of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from theapplicable law.
Convocation of the General Meeting of Shareholders
Shareholders registered are convened to Shareholders’ Meetings by ordinary mail and by publication in the Swiss Official
Gazette of Commerce at least 20 days prior to the day of themeeting. Any shareholder who, on the day determined by the
Board of Directors, is registered as a shareholder has theright to attend and vote at the Shareholders’ Meeting.

LEM | Annual Report 2010/11

21

AgendaAccording to Article 10 of the Articles of Incorporation, one
or several shareholders who collectively hold 10% of theshare capital can call for a Shareholders’ Meeting and­s ubmit matters to be placed on the agenda.

Evaluation and control of the auditors is done by the Audit
Committee which makes recommendations to the Board of
Directors. In particular, the Audit Committee evaluates theperformance, fees, and independence of the auditors.

Dividend policy
LEM targets a payout ratio significantly above 50% of theconsolidated net profit for the year, to be proposed by the
Board of Directors to the Shareholders’ Meeting.

and in writing. Financial statements as well as management
letters are discussed in the Audit Committee in the presenceof the external auditors.

7 Change of control and defensive measures
Opting-out clause
In June 2010, the Shareholders introduced an opting-out
clause according to article 32 of the Federal Act on Stock
Exchanges and Securities Trading (SESTA) in the articles ofincorporation of the company. This clause releases any
shareholder from the obligation to submit a public takeoveroffer to all shareholders as soon as his participation in LEM
exceeds 33 1/3 % of the voting rights.
Clauses of changes of control
There is no particular clause in the Articles of Incorporation
for changes of control. If dismissed in the case of a changeof control of the company, three members of the Senior
Management will receive additional severance payments
equal to 6 months remuneration.
8 Auditors
The Group auditors Ernst & Young Ltd, Geneva, wereappointed in 2005 initiating their mandate with the financial
year 2005/06. The responsible partner since 2005 is Hans
Isler.

The auditors report on the results of their audits both orally

During 2010/11 Ernst & Young attended three regular Audit
Committee meetings.
9 Information policy
LEM informs its shareholders on the business status and its
results on a quarterly basis. After the first six months a halfyear report is published. This report, as well as the Annual
Report, is distributed to all shareholders inscribed in theshare register and made publicly available on its website
www.lem.com. Once a year, LEM holds a presentation forthe media and financial analysts. Internal processes assurethat price-sensitive facts are published without delay inaccordance with the ad hoc publicity rules of the SIX Swiss
Exchange.
At www.lem.com, detailed information (e.g., the Articles ofIncorporation, interim and annual reports, investor presentations, as well as important dates) is available.

Contact for investors and media:
Julius Renk, CFO
8, chemin des Aulx
CH-1228 Plan-les-Ouates
Ernst & Young charged the following fees for professional or send an e-mail to investor@lem.com
services rendered for the 12-month period ending­ (phone +41 22 706 12 30).
31 March 2011:
Type of service
In CHF thousands

2010/11

Audit services
Tax services
Other services
Total

416
741
5
1’162

LEM | Annual Report 2010/11

22

Financial Results

LEM | Annual Report 2010/11

23

Financial Results
Sales
LEM sales increased by 59.7% to CHF 296.2 million in
2010/11. There was an unfavorable foreign currency impactof 10.4% in 2010/11. At constant exchange rates the sales
increase would have been 70.1%. The currency impact
stems mainly from the unfavorable EUR and USD development during the year.
Gross margin
The gross margin decreased by 0.8 percentage points to
42.6%. The main reason for this is the unfavorable foreign
currency impact mainly from EUR and USD.

Operating expenses
The operating expenses (including R&D) of CHF 65.9 million
increased by 20.6% compared to the previous year which
is mainly due to increase in activity. Indeed, as a percentage
of sales, the ratio decreased from 29.5% to 22.2%.
The R&D expenses increased by 21.6% in 2010/11 to
CHF 14.0 million (prior year CHF 11.5 million). R&D cost as
a percentage of sales decreased from 6.2% last year to
4.7% for the current fiscal year.
The valuation of the liabilities for stock option plans (SOP)at the share price of CHF 570 on 31 March 2011 (prior year
CHF 340) and the exercises of stock options at a higher
average price led to additional SOP costs below operational
EBIT of CHF 5.4 million (CHF 8.3 million in 2009/10).

April to March
In CHF thousands

2010/11

2009/10

Sales
Cost of goods sold
Gross margin

296'203(169'904)
126'299

185'512(105'076)
80'436

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operational EBIT

(23'406)(28'842)(14'031)(319)
712
60'413(19'757)(23'583)(11'542)(252)
504
25'807

Additional SOP costs/income(5'426)(8'285)

EBIT

54'987

17'522Financial expense
Financial income
Foreign exchange effect

(475)
116
(4'263)(419)
372(1'308)

Profit before taxes

50'36516'167

Income taxes(10'722)(5'635)

Net profit of the period

39'643

10'532Attributable to :LEM shareholders
Non-controlling interests
Net profit

39'59251
39'643

10'47557
10'532

Operational EBIT and EBIT
The operational EBIT (before additional SOP cost) increased
by 134.1% to CHF 60.4 million (prior year CHF 25.8 million).

LEM | Annual Report 2010/11

24

Taking into account the additional SOP cost in 2009/10 and2010/11, the EBIT is 3.1 times higher than last year at CHF
55.0 million against CHF 17.5 million last year.

Net sales

Gross margin

300

130

275

120

250

110

In CHF millions

In CHF millions

50%% of sales

44%

70

150

60

125

41%

50

100

40

75

30

50

20

25

10
06/07

07/08

08/09

09/10

R&D expenses

35%
07/08

08/09

09/10

9%

65

% of sales

35%

30%

25%

15%

20

10%

10

07/08

08/09

09/10

5%
06/07

Net earnings
In CHF millions

45

0

10/11

07/08

08/09

09/10

% of sales

20%
18%

35

25%

40
20%

30
15%

20
10%

10

0

5%
06/07

10/11

07/08

08/09

09/10

Net financial assets

Equity and equity ratio

40

100

In CHF millions

40

50

5

5
06/07

30%

15

15

0%

% of sales

25

25

0

60

35
20%

30

3

10/11

45

45

35

3%

09/10

55

40

6

08/09

In CHF millions

50
6%

07/08

EBIT

55

9

15%

0
06/07

60
12

20%

10/11

In CHF millions% of sales

25%

10

Operational EBIT

In CHF millions

30
20

06/07

10/11

30%

40

38%

0

0

35%
50

80

175

40%

60

90

200

% of sales

70

47%

100

225

15

Operating expenses (incl. R&D exp.)

In CHF millions

10/11

In CHF millions% of assets

80%

90

35

70%

80

16%

30

14%

25

12%

20

60%
70

30

10%

10

40%

50

20
15

50%

60

25

40

15

30%

30

8%

10

6%

5

4%

0

20%
20

5
0
06/07

07/08

08/09

09/10

10/11

10%

10

0%

0
06/07

07/08

08/09

09/10

10/11

06/07

07/08

LEM | Annual Report 2010/11

25

08/09

09/10

10/11

Financial expenses
The net financial expenses increased from CHF 1.4 million
to CHF 4.6 million in 2010/11 mainly driven by the unfavorable impact of foreign exchange rates.
Taxes
The tax rate decreased from 34.9% (31.9% excluding withholding tax for prior years) to 21.3% in 2010/11, linked toa better structure of the result.
Net profit for the year
Net profit for the year is 3.8 times higher than last year
resulting in CHF 39.6 million.
Balance sheet
LEM maintained its net working capital (current assets –current liabilities – net cash) in % of sales at 13.3% against
12.9% last year.
The net financial assets (cash – financial liabilities) decreased
from CHF CHF 29.8 million to 26.5 million. On 31 March
2011, LEM had no significant interest bearing financial liabilities.
The balance sheet remains healthy with an equity ratio of60% (prior year 63%).
Cash flow
The cash flow before changes in net working capital reached
CHF 51.5 million in 2010/11. CHF 21.4 million have been
invested in the net working capital to sustain the businessgrowth. The free cash flow increased by CHF 7.7 million
compared to last year at CHF 20.7 million and nearly cameback to 2008/09 level.

LEM | Annual Report 2010/11

26

LEM Group
Consolidated Statement of Financial Position ............ 28
Consolidated Income Statement . . .............................. 29
Consolidated Statement of Comprehensive Income ... 30
Consolidated Statement of Changes in Equity .. .......... 30
Consolidated Cash Flow Statement ........................... 31
Accounting Policies . . ................................................. 32
Notes to the Consolidated Financial Statements ........ 39
Auditors Report . . ....................................................... 54

LEM | Annual Report 2010/11

27

Consolidated Statement of
Financial Position
AssetsIn CHF thousands

Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Income Tax receivable
Other current assets
Total current assets

Notes

31.3.2011

31.3.201041
2

27’23160’02634’187
1’310
1’717
124’471

29’75643’45421’744

1’919
25’6127’796
2’181
37’508662
23’6659’697
1’695
35’719161’979

132’662

Notes

31.3.2011

31.3.20108

29’617
16’295
7’560
1’556
618
2’821
58’467

23’416
10’077
2’033
328
2
7’335
43’191

969
5’541
89
6’599

1’729
4’261
102
6’092

65’06649’283575(7’091)
17’91485’51596’91396’913575(3’387)21’44864’52983’165214
83’379161’979

132’662

3

Non-current assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets

16
5
6
7, 21

Total assets

1’989
96’943Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses and deferred income
Current income tax payable
Current provisions
Current financial liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities

9
4
10

9
17
10

Total liabilities
EquityShare capital
Treasury shares and derivative instruments on treasury shares
Reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
Total liabilities and equity

LEM | Annual Report 2010/11

28

11
11

12

Consolidated Income Statement
April to March
In CHF thousands

Sales
Cost of goods sold
Gross margin

Notes

2010/11

2009/1013

296’203(169’904)
126’299

185’512(105’076)
80’436

Sales expense
Administration expense
Research & development expense
Other expense
Other income
Operating profit

13
13
13

(23’966)(33’334)(14’405)(319)
712
54’987(20’902)(30’077)(12’188)(252)
504
17’522Financial expense
Financial income
Exchange effect

14
15
16

(475)
116
(4’263)(419)
372(1’308)50’36516’167(10’722)(5’635)

Net profit for the year

39’643

10’532Attributable to:
LEM shareholders
Non-controlling interests
Net profit for the year

39’59251
39’643

10’47557
10’532

34.69
34.51

9.2
9.2

Profit before taxes
Income taxes

17

The results of both years are derived from continuing operations.
Earnings per share, in CHF
Basic earnings per share
Diluted earnings per share

18
18

The accompanying notes are an integral part of the consolidated financial statements.

LEM | Annual Report 2010/11

29

Consolidated Statement ofComprehensive Income
April to March
In CHF thousands

2010/11

2009/10

Net profit for the period recognized in the income statement

39’643

10’532Currency translation difference
Unrealized gain on derivatives designated as cash flow hedges
Fair value adjustments on cash flow hedges
Other comprehensive income of the period(4’158)(7)(1’972)
9

Total comprehensive income for the period
Attributable to shareholders
Attributable to non-controlling interests

35’47835’427
51

8’569
8’502
67

Non-­
controllinginterests Total equity

Consolidated Statement of
Changes in Equity
Attributable to equity holder of the company
In CHF thousands

1 April 2009
Total comprehensive income
Changes in capital
Dividends paid
Dividends paid to non-controllinginterests
Performance share plan
Movement in treasury shares
Movement in derivative instruments
on treasury shares
31 March 2010
1 April 2010
Total comprehensive income
Changes in capital
Dividends paid
Dividends paid to non-controllinginterests
Changes in non-controlling interests
Performance share plan
Movement in treasury shares
Movement in derivative instruments
on treasury shares
31 March 2011

Share
­c apital

Capitalreserve

Reservefor ­t reasury
sharesTreasurysharesFair value
reserve

Share
plan

Translation
reserve

Retainedearnings

575

13’407

5’627(5’627)

(2)
9

423

3’464
(1’982)65’430
10’475(11’376)

19567

83’492
8’569
0(11’376)
(48)
(48)

502

502
2’240
0

2’240

(2’240)

2’240
0

575

15’647

3’387(3’387)

7

925

1’482

64’529214575

15’647

3’387(3’387)

7
(7)

925

1’482
(4’158)64’52939’59221451(22’895)18

83’37935’4780(22’895)
(50)
(50)

(215)

(197)
631
(5’456)6’023

096’913631

575(5’456)
1’752

5’456
(1’752)(5’456)
1’752

11’943

7’091(7’091)

4’271
0

1’556

(2’676)85’51583’379The amount available for dividend distribution is based on LEM Holding SA’s shareholders’ equity determined in accordance with the legal provisions of the Swiss Code of Obligations.

LEM | Annual Report 2010/1130

Consolidated Cash Flow Statement
April to March
In CHF thousands

Cash flow from operating activities
Net profit of the year
Adjustment for non-cash items_ _ Current income taxes_ _ Net financial result_ _ Derivative financial instruments revaluation_ _ Divestment of companies_ _ Fair value charges for share-based payments_ _ Depreciation and amortization_ _ Impairment loss
_ _ Increase (+) / decrease (–) of provisions and deferred taxes_ _ Movement in pension
Interest received
Interest paid
Taxes paid
Payment for cash-settlement of options
Cash flow before changes in net working capital
Change in inventory
Change in accounts receivable and other current assets
Change in payables and other current liabilities
Cash flow from changes in net working capital
Cash flow from operating activities

2010/11

2009/1039’643

10’532

10’420
107
0
0
6’052
7’403
660
3’397
(515)
116
(223)
(6’140)(9’423)
51’498(16’600)(18’371)
13’519(21’452)
30’046

6’488
46
9
0
9’423
6’541
(4’193)223(419)(9’433)(1’009)18’2083’500(10’402)
14’9938’091
26’299Cash flow from investing activities
Investment in fixed assets
Disposal of fixed assets and intangible assets
Acquisition of companies
Investment in intangible assets
Increase (–) / decrease (+) in other assets
Cash flow from investing activities(345)
0(9’383)(5’757)58(1’362)(6’069)(145)(13’275)

Cash flow from financing activities
Acquisition of non-controlling interests
Treasury shares acquired (–) /divested (+)
Sale of derivative instrument on own shares
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to non-controlling interests
Decrease (–) in financial liabilities
Cash flow from financing activities(197)(5’768)
5’715(22’895)(50)(13)(23’209)02’290
0(11’376)(48)(1’438)(10’572)

Change in cash and cash equivalents(2’546)

2’452

Cash and cash equivalents at the beginning of the period
Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

29’756(597)
26’61327’951(647)
29’756(9’147)
109

LEM | Annual Report 2010/1131

Accounting Policies
1 General information
LEM Group (the Group) is a market leader in providing innovative and high-quality solutions for measuring ­e lectricalparameters. Its core products – current and voltage transducers – are used in a broad range of applications in industrial, traction, energy and automotive markets. The Grouphas operations in eleven countries and employs around
1’300 people. The parent company of LEM Group is LEM
Holding SA (the Company), which is a limited company
incorporated in Switzerland.
The financial year ends on 31 March (the year). The registered office is as follows: 8, chemin des Aulx, CH-1228 Planles-Ouates/Geneva. The Company has been listed on the
SIX Swiss Exchange since 1986.
The Board of Directors approved the consolidated financial
statements on 17 May 2011.
Standard or­i nterpretation

IAS 27 revised
IAS 39 – IFRIC 9IFRS 3 revised
IFRIC 17IFRS 1IFRS 2
IAS 32
Amendments

2 Summary of significant accounting principles
2.1 Basis of preparation
The consolidated financial statements of LEM Group havebeen prepared in accordance with the International F­ inancial
Reporting Standards (IFRS) and interpretations publishedby the International Accounting Standards Board (IASB) andcomply with Swiss law.
The consolidated financial statements have been preparedusing the historical cost convention except that, as discussed in the accounting policies below, certain items likederivatives are recorded at fair value.
2.2 Adoption of new and revised International­F inancial Reporting Standards and Interpretations
In 2010/11, LEM Group introduced the following revised
standards and interpretations:

Title

Effective date

ImpactConsolidated and separate financial statement
Financial instruments: Recognition and measurement:­E ligible hedged items and embedded derivatives
Business combinations – revised
Distribution of non-cash assets to owners
Amendments to IFRS 1 – Additional exemptions for firsttime adopters
Group cash-settled share-based payment transactions –Amendments
Classification of rights issues
Annual improvement project

1 July 2009
1 July 2009

None
None

1 July 2009
1 July 2009
1 January 2010

None
None
None

1 January 2010

None

1 February 2010
1 January 2010
unless otherwise
stipulated

None
None

LEM Group will adopt the following revised standards and interpretations in the future:
Standard or­i nterpretation

IFRIC 19
IAS 24IFRIC 14
IAS 12
IRFS 1IFRS 7IFRS 9Amendments

Title

Effective date

Extinguishing liabilities with equity instruments
Related-party disclosures
Prepayments of a minimum funding requirement –Amendments
Deferred tax, recovery of underlying assets
Severe hyperinflatation and removal of fixed dates forfirst-time adoptors
Transfers of financial assets
Financial instruments
Annual improvement project

1 July 2010
1 January 2011
1 January 2011
1 January 2012
1 July 2011
1 July 2011
1 January 2013
1 July 2010 or 1 January 2011

The Group will implement the relevant new standards when they become effective. The impact from applying above standards and interpretations has not been evaluated but is expected to have no material effects on the capital, financial,income or cash flow situation of LEM.

LEM | Annual Report 2010/11

32

2.3 Summary of critical accounting estimates and­j udgments
The preparation of financial statements in conformity withIFRS requires management to make estimates and assumptions that affect the reported amounts of revenues,
expenses, assets, liabilities and related disclosures at thedate of the financial statements. These estimates are basedon management’s best knowledge of current events andactions that the Group may undertake in the future. However, actual results could differ from those estimates. The
key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date are
discussed below.
Impairment of goodwill, other intangible assets andproperty, plant and ­e quipment
The Group tests annually whether goodwill has suffered any
impairment in accordance with the accounting policy. The
recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. Other­intangible assets and property, plant and equipment areassessed according to the same rules. These calculations
require the use of estimates in particular to the expected
growth of sales, discount rates and development of raw
material prices.
Provisions
Provisions are recognized only if the specific criteria under
IFRS are met. Provisions represent presumed obligations
arising from past events and are recognized only if theiramount can be estimated reliably. Nevertheless, provisions
are based on assumptions.
Income and other taxes
LEM Group is subject to income taxes in numerous jurisdictions. Judgment is required in determining the worldwide
provision for income taxes. There are many transactions
and calculations for which the ultimate tax determination is
uncertain in the ordinary course of business.
Employee benefits
The standard requires that certain assumptions are madein order to determine the amount to be recorded for retirement benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial
assumptions such as expected inflation rates, employee
turnover, expected return-on-plan assets and discountrates. Substantial changes in the assumed development of
any of these variables may significantly change LEM Group’s
retirement benefit obligation and pension plan assets.
Valuation of deferred tax assets
The carrying amount of deferred tax assets is reviewed oneach balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will beavailable to allow all or part of the asset to be recovered.

2.4 Basis of consolidation
The consolidated financial statements are comprised of LEM
Holding SA and of its subsidiaries.
Subsidiaries
Subsidiaries, which are those entities over whose operations the Group has the power to exercise control, which isnormally the case when it owns more than one half of thevoting rights, are consolidated.
Acquisitions are accounted for using the purchase method.
Companies that are acquired or sold during the financial
year are included in the Group financial statements up to
the date of transfer of control. The costs of purchasing acompany are determined as the sum of the fair value of theassets that are to be paid to the seller and the obligations
that are entered into, or acquired, on the date of purchase,plus the cost that can be directly allocated. Identifiableacquired assets, liabilities and contingent liabilities are­r ecognized at their fair value as of the date of their acquisition. The Group’s share of the purchase price that exceeds
the fair value of the identifiable net assets is recognized as
goodwill. The Group’s share of the fair value of the identificable net assets that exceeds the purchase price is shownas gain on bargain purchase on the income statement.
Intragroup assets and liabilities as well as income andexpenses are set off against each other.
Also intragroup intermediate profits on inventories and fixed
assets are eliminated.
Associates
Investments in associated undertakings are accounted forusing the equity method. These are undertakings over which
the Group exercises significant influence, but which it does
not control.
No associated undertakings exist as per 31 March 2011
and 31 March 2010.
2.5 Foreign currencies
Functional and presentation currency
The consolidated financial statements are presented in
Swiss francs as the presentation currency. The subsidiaries
use local currencies as their functional currency, which isthe currency of the primary economic environment in which
they operate.
Foreign currency translation
All assets and liabilities in the balance sheets of ­s ubsidiaries
that are denominated in the respective functional currencies
are translated into Swiss francs at the year-end exchange
rate. Items in the income statement and cash flow statement
are translated at the average exchange rate for the year.
The resulting translation differences are recognized in shareholders’ equity. When a company is sold, the cumulativetranslation differences recognized in shareholders’ equity
are transferred to the income statement.
The following table summarizes the principal exchange rates
that have been used in the translation process.
LEM | Annual Report 2010/11

33

Currency

Income statementof 2010/11
Average rate in CHF

Income statementof 2009/10
Average rate in CHF

Balance sheet
31.3.2011
Year-end rate in CHF

Balance sheet
31.3.2010
Year-end rate in CHF

EUR
GBP
JPY
USD
RUB
CNY
DKK

1.340
1.575
0.0118
1.014
0.034
0.151
0.180

1.502
1.700
0.0115
1.064
0.035
0.156
0.202

1.299
1.474
0.0111
0.917
0.032
0.140
0.174

1.432
1.603
0.0115
1.064
0.036
0.156
0.192

Foreign currency transactions
Foreign currency transactions by subsidiaries are translated
at the market rate prevailing at the time. The monetary assets
and liabilities are translated at the year-end rates while nonmonetary assets are translated at historical rates. Gains andlosses arising from the transactions as well as from thetranslation of monetary assets and liabilities in foreign currencies are recorded as income or expenses in the income
statement (except from translation differences arising froma monetary item that forms part of the Group’s net investment in a foreign operation, which are included in shareholders’ equity).
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash
at bank and cash at postal accounts and bank deposits withan original maturity of three months or less from the date ofacquisition, that are readily convertible to known amountsof cash. For the purpose of the consolidated cash flow
statement, cash and cash equivalents consist of cash andcash equivalents as defined above, net of outstanding bankoverdrafts.
2.7 Inventories
Inventories are stated at the lower of cost or net realizablevalue. The first-in, first-out (FIFO) method is applied. The costof finished goods and work in process comprise raw materials, direct labor costs and other costs that can be directly
allocated, such as production overhead expenditures.
Financing costs are not included in inventories. Provision
for write-downs are established when there is an objective
indication that the Group will not be able to sell the goodsin due time.
2.8 Property, plant and equipment
Property, plant and equipment is stated at cost of acquisition or construction, less depreciation and any impairment.
Depreciation is calculated on a linear basis on the following
estimated useful life:Land
Buildings
Machinery and equipment
Tools and moulds
VehiclesIT equipment

LEM | Annual Report 2010/11

nil
20–40 years
5–8 years
2–5 years
3–5 years
3–5 years

34

Repairs and renewals are charged to the income statement
when the expense is incurred. Subsequent expenditure on
an item of tangible fixed assets is capitalized at cost only
when it is probable that future economic benefits ­a ssociatedwith the item will flow to the Group and the cost of the item
can be measured reliably.
2.9 Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net assets of
the acquired subsidiary/associated undertaking at the dateof acquisition. Goodwill on acquisitions is reported in thebalance sheet as an intangible asset and carried at cost lessaccumulated impairment losses. Gains and losses on thedisposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Research and development
Research costs are written off as incurred. Development
cost are capitalized as intangible assets only, if it is ­p robablethat future economic benefits will flow to the Group. Suchdevelopment costs are capitalized and written off over thelife of the product or process.
Other intangible assets
Other intangible assets with definite useful lives are carriedat cost less amortization and any impairment.
Expenditure on computer software, acquired patents, trademarks and licenses is capitalized and amortized using thestraight-line method over their useful lives, not exceeding
five years.
2.10 Impairment of tangible fixed assets and intangible assets
Assets that are subject to depreciation and amortization are
reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognized for theamount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higherof an asset’s fair value less cost to sell and value in use.

For the purpose of assessing impairment, assets aregrouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating unit).
The value in use is calculated based on the estimated future
cash flows expected to result from the use of the asset andeventual disposal, discounted using an appropriate noncurrent interest rate.
Goodwill is tested for impairment annually (at 31 March) andwhen circumstances indicate that the carrying value may
be impaired. Impairment is determined by assessing therecoverable amount of the cash-generating unit to which
the goodwill relates. Impairment losses relating to goodwill
cannot be reversed in future years.

The Group uses derivative financial instruments to hedge
foreign exchange risks of forecasted transactions. Derivative financial instruments can comprise of forward exchange
contracts and optionbased structures.

2.11 Assets held for sale
LEM Group’s assets are reclassified as held for sale whena sale within one year is highly probable and the assets areavailable for immediate sale in their present condition.
Non-current assets held for sale are reevaluated at the lowerof fair value less cost to sell or the carrying amounts at thedate they meet the held-for-sale criteria. Any resulting
impairment loss is recognized in the income statement. In
the two years under review there were no assets held forsale in LEM Group.

2.15 Leases
Assets acquired under non-current finance leases are capi­
talized as part of the fixed assets. Lease assets are depreciated over the estimated useful life of the asset. However,if there is no reasonable certainty that the Group will obtainownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of theasset and the lease term.
The associated obligations are included dependent on theirmaturity in current or non-current financial liabilities respectively. In the years under review LEM Group does not holdany finance lease.
Rentals payable under operating leases are charged to theincome statement as incurred.

2.12 Financial assets
Financial assets can comprise cash, receivables, accrued
income, marketable securities, derivative financial instruments and loans.
Accounts receivable are carried at original invoice amountless an allowance made for doubtful accounts based on areview of all outstanding amounts at the year end. Allowances for doubtful accounts are established when there isan objective indication that the Group will not be able tocollect the amounts due. Allowances for doubtful accounts
are written off when identified.
2.13 Derivative financial instruments
Derivative financial instruments are measured at fair value.
Any gains and losses arising from changes in fair value onderivatives are taken directly to the income statement.
Derivative financial instruments are shown as part of othercurrent assets and other current liabilities. In case the maturity is more than one year, derivative financial instruments
are recognized under other non-current assets or other noncurrent financial liabilities.
For a derivative financial instrument to be recognized as aqualified hedging transaction, certain requirements r­ egarding
documentation, probability of occurrence, effectiveness andreliability of measurement, both of the hedging instrument
and of the hedged underlying transaction, must be fulfilled.
When the cash-flow-hedging transaction is maturing, thecumulative gains and losses previously recognized in shareholders’ equity are included in the income statement of theperiod.

2.14 Financial liabilities
Financial liabilities comprise bank overdraft at the end of
the period.
Financial liabilities that are due within 12 months after thebalance sheet date are classified as current liabilities unlessthe Group has an unconditional right to defer settlement of
the liability until more than 12 months after the balance
sheet date.

2.16 Employee benefits
The Swiss subsidiaries provide a defined benefit plan for
employees; the other subsidiaries provide defined contribution plans. In both cases the charges are included in therelated periods in the personnel expenses of the various
functions where the employees are located.
Defined benefit plan
A qualified independent actuary values the funds on anannual basis. The obligation and costs of pension benefits
are determined using the projected unit credit method. Past
service costs are recognized on a straight-line basis over
the average period until the amended benefit becomesvested. Gains or losses on the curtailment or settlement ofpension benefits are recognized when the curtailment or
settlement occurs. Actuarial gains or losses are amortizedbased on the expected average remaining working time ofthe participating employees, but only to the extent that the
net cumulative unrecognized amounts exceed 10% of thegreater of the present value of the defined benefit obligationand the fair value of plan assets at the end of the previous
year. In accordance with IFRIC 14, any assets resulting fromsurpluses in defined benefit plans are limited to the value ofthe maximum future savings from reduced contributions.
Liabilities are fully provisioned.

LEM | Annual Report 2010/11

35

Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans
based on local practices and regulations.
Equity compensation plan
In May 2009, the Board of Directors decided not to issue
any further equity programs (stock option plans or PSP).
The company administrates the legacy programs until the
expiry of the last plan (SOP 6) in March 2012.
LEM Group operates currently one remaining stock option
plan (last year two) and a share-based plan.
Stock options were granted to the Board of Directors andmanagers. The option plans are cash-settled and the fairvalue of the options is linked to the share price development.
Based on the share price at each quarter end the fair valueof the options – based on the “Hull-White” option model – iscalculated by an independent specialist. Based on thesefair values the year-end value of options is adjusted.
The Performance Share Plan (PSP) was granted to ­­m anagers
and is considered to be equity-settled. The fair value of the
PSP granted to the employees was estimated at the grant
date. The amounts were charged to the income statement
over the relevant vesting period and adjusted to reflect
actual and expected levels of vesting.
Stock option plans
The stock option plans are cash-settled. The total amount
expensed for the options not yet exercised is determinedby reference of the fair value of the instruments granted ateach closing period. The quarterly fair value calculations are
performed by a third party applying the “Hull-White” model
based on the LEM share price at the period end. The pro
rata payable is calculated based on the fair value and theestimate of the number of options that are expected to
become exercisable and LEM recognizes the impact in theincome statement.
LEM Incentive System
The LEM Incentive System (LIS) consists of a part 1, whichis related to the individual’s performance, and a part 2,
which is related to the performance of LEM Group. The LISpart 2 is an annual bonus which is based on the Economic
Value Added (EVA) performance of LEM evaluated over the
3 previous fiscal years. Both elements are cash-settled andthe bonus payments are made in the first quarter of the­f ollowing fiscal year. The estimated payments are accrued
for per year end.

LEM | Annual Report 2010/11

36

2.17 Provisions and contingent liabilities
Provisions are recognized when the Group has a present
legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required tosettle the obligation, and a reliable estimate can be madeof the amount of the obligation
Claims and litigations
The Group recognizes the estimated liability to replace products still under warranty at the balance sheet date. This
position is calculated based on past history of the level ofrepairs and replacements. Additional specific provisions arebooked when required.
Onerous contracts
The Group presently sees no need for provisions for onerous contracts.
Restructuring
A constructive obligation to restructure arises only when an
entity has a detailed formal plan for the restructuring identifying at least:_ _ the business or part of a business concerned;_ _ the principal locations affected; the location, function, andapproximate number of employees who will be compensated for terminating their services;_ _ the expenditures that will be undertaken; and_ _ when the plan will be implemented;
and raised a valid expectation in those affected that it will
carry out the restructuring by starting to implement that planor announcing its main features to those affected by it.
Contingent liabilities
Contingent liabilities arise from past events where the outcome depends on future events. As the probability either
cannot be measured reliably or the probability for a subsequent outflow lies below 50%, contingent liabilities are notrecognized in the balance sheet but are described in thenotes.
2.18 Share capital
LEM Holding SA has only ordinary registered shares. Dividends on ordinary shares are recognized in equity in the
period in which they are declared.
Treasury shares
Own equity instruments which are reacquired (treasury shares)
are recognized at cost and deducted from equity. No gain orloss is recognized in the income statement on the purchase,sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying amount and theconsideration is recognized in retained earnings.

2.19 Non-controlling interests
Non-controlling interests represent the portion of profit or loss
and net assets not held by the Group and are presented separately in the consolidated statement of income and withinequity in the consolidated statement of financial position.
2.20 Revenue recognition
Revenue from the sale of products comprises all revenues
that are derived from sales of products to third parties after
deduction of price rebates and value added tax. Revenues
from the sale of products are recognized when the significant risks and rewards of ownership of the goods havepassed to the buyer, usually on delivery of the products.

Deferred taxation
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax
base of assets and liabilities and their carrying amounts inthe financial statements. Deferred taxes are determinedusing tax rates that apply, or have been announced, on thebalance sheet date in the countries where the Group is
active. Tax losses carried forward are recognized as deferred
tax assets to the extent that it is probable that tax profit will
be available in the future against which the tax losses carried forward can be utilized. Deferred tax assets and liabilities are offset against each other if the corresponding
income taxes arise by the same tax authority and a legally
enforceable right for offsetting exists.

2.21 Income taxes and deferred taxation
Income taxes
Income taxes comprise all current and deferred income taxes,
including the withholding tax payable on profit distributions
within the Group. Income taxes are recognized in the consolidated income statement except for income taxes on transactions that are recognized directly in shareholders’ equity.

LEM | Annual Report 2010/11

37

Business segment information
Industrial
In CHF thousands

Automotive

LEM Group

2010/11

2009/102010/11

2009/102010/11

2009/10272’659
59’607
52’694

170’780
24’90019’367

23’5443’443
2’293

14’732(837)(1’845)296’203
63’05054’987(4’622)(10’722)39’643185’51224’063
17’522(1’355)(5’635)
10’532

4’770
1’483
660

4’430
1’103
0

1’144
6
0

990
18
0

5’914
1’489
660

5’420
1’121
0

6’913

5’533

1’150

1’008

8’063

6’541

(4’883)(8’481)

(543)

(942)

(5’426)(9’423)120’791

90’720

9’795

9’811

120’791

90’720

9’795

9’811

130’586
31’39327’231
4’162
161’979

100’53132’13129’757
2’374
132’662

48’106

40’543

1’657

2’538

49’76315’303
7’560
3’186

43’081
6’202
2’033
2’681

48’106

40’543

1’657

2’538

4’557
65’066

1’488
49’283

Capital expenditure:
Tangible assets
Intangible assets

8’899
345

5’192
6’218

249
0

565
0

9’148
345

5’757
6’218

Total

9’244

11’410

249

565

9’493

11’975

Income statement
Sales
EBITDA
Operating profit
Net financial expense
Taxes
Net profit for the year
Depreciation and amortization:
Tangible assets
Intangible assets
Impairment loss
Goodwill impairment
Total
Significant non-cash items(Increase) / decrease of liabilities forshare-based payments
Balance sheet
Segment assets
Unallocated assets
Of which cash and cash equivalents
Of which other unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Of which income tax payable
Of which deferred withholding
tax liability
Of which other unallocated liabilities
Total liabilities

Geographical information
Germany

China

USA

Italy

Japan

Switzerland

Rest of the world

LEM Group

In CHF thousands

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

2010/11 2009/10

Sales

56’58450’48631’20741’48329’902

26’912

14’851

9’827

4’516

81’00959’013296’203 185’512

9’045

10’188

7’220

7’618

19’594

17’492

1’854

421

Non-current assets

38’99726’04410’884For management purposes, LEM Group is organized into
two operating segments, Industrial and Automotive. The­I ndustrial segment develops, manufactures and sells electronic components called transducers for the measurementof current and voltage of various industrial applications. The
Automotive segment develops, manufactures and sells
transducers for applications in automotive markets.
Unallocated assets correspond to cash, non-current financial receivables as well as deferred tax assets. Unallocatedliabilities comprise bank borrowings, income tax payableand deferred tax liabilities.

LEM | Annual Report 2010/11

38

37’71335’719Transactions between the subsidiaries and/or business segments are conducted at arm’s length.
The depreciation and amortization charge for the Industrial
segment at 31 March 2011, includes the impairment of apatent for CHF 660 thousand. Please refer to the Note 6.
Intangible assets for more detail.

Notes to the Consolidated Financial
Statements
1 Accounts receivable
In CHF thousands

31.3.2011

31.3.2010

Accounts receivable – trade
Allowance for doubtful accounts
Total accounts receivable – trade
Other receivables
Total

54’828(1’229)53’5996’427
60’02639’789(1’424)38’3655’089
43’454

2010/11

2009/10

1’424

1’716

333
(472)
(56)
0
1’229

76
(338)
(30)
0
1’424

Movements of allowance for doubtful accounts
In CHF thousands

Additions charged to income statement
Amounts written off
Foreign exchange effectChange of scope
Total
Aging analysis of accounts receivable
In CHF thousands

Not due< 30 days

31–90 days

91–180 days

>180 days

Total

31 March 2011
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

41’246(3)
6’223
47’466

8’698
0
204
8’902

3’053
(155)

1’021
(264)

810
(810)

2’898

757

0

54’828(1’229)6’427
60’02631 March 2010
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

26’4270
5’089
31’516

9’816
0
0
9’816

1’993
(155)
0
1’838

367
(169)
0
198

1’186
(1’100)086

39’789(1’424)5’089
43’454

The allowance for doubtful accounts is computed as a percentage of aged balances. No receivables have been i­ ndividually
impaired.
2 Inventories
In CHF thousands

31.3.2011

31.3.2010

Raw materialWork in progress
Finished goods and goods for resale
Total

15’481
3’167
15’54034’187

10’3962’314
9’034
21’744

Above total inventories include provisions for write-down of CHF 5’630 thousand (2009/10 CHF 2’585 thousand).

LEM | Annual Report 2010/11

39

3 Other current assets
In CHF thousands

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Total

31.3.2011

31.3.2010

681
1’036
0
1’717

684
1’298
7
1’989

For further information on derivative financial instruments, see note 24.
4 Cash and cash equivalents
For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprise the following:
In CHF thousands

31.3.2011

31.3.2010

Cash and cash equivalents
Bank overdrafts
Total

27’231(618)
26’61329’7560
29’756

Land and buildings

Machinery andequipment

Total

Net book value 1 April 2010
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Impairment gain (loss)
Other movements
Depreciation charge for the year
Net book value 31 March 2011

330
(11)

23’335(1’185)(13)306(5’901)25’306

23’665(1’196)
0
9’147
(90)
0
0
(5’914)25’612

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2011

449
(143)
306

63’820(38’514)25’30664’269(38’657)
25’612Net book value 1 April 2009
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Impairment gain (loss)
Other movements
Depreciation charge for the year
Net book value 31 March 2010

351
(8)
0
0
0
0
0
(13)
330

23’220
(537)
335
5’757
(33)
0
0
(5’407)
23’33523’571
(545)
335
5’757
(33)
0
0
(5’420)23’665

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2010

465
(135)
330

58’065(34’730)
23’33558’530(34’865)
23’665

5 Property, plant and equipment
In CHF thousands

LEM | Annual Report 2010/11

40

9’147
(90)

6 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

Net book value 1 April 2010
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Impairment gain (loss)
Other movements
Amortization charge for the year
Net book value 31 March 2011

3’667
(66)

5’154
0

876
(12)

3’601

(1’192)
3’302

(297)
893

9’697
(78)
0
345
(19)
(660)
0
(1’489)7’796

At cost of acquisition
Accumulated amortization
Net book value 31 March 2011

5’329
(1’728)
3’601

4’952
(1’650)
3’302

4’101
(3’208)893

14’382(6’586)
7’796

Net book value 1 April 2009
Foreign exchange effectChange in scope of consolidation
Investment
Disposal
Other movements
Amortization charge for the year
Net book value 31 March 2010

3’717
(50)
0
0
0
0
0
3’667

0
0
0
5’940
0
0
(786)
5’154

968
(9)
0
278
(26)
0
(335)
876

4’685
(59)
0
6’218
(26)
0
(1’121)
9’697

At cost of acquisition
Accumulated amortization
Net book value 31 March 2010

5’403
(1’736)
3’667

5’940
(786)
5’154

3’636
(2’760)876

14’979(5’282)
9’697

345
(19)
(660)

In the financial years under review, development costs havebeen capitalized for CHF 158 thousand (CHF 0.00 at 31
March 2010).

carrying value of the cash-generating unit ­i ncluding goodwill
was compared to the value in use and no impairment was
found for the year ended 31 March 2011.

The entire goodwill of the LEM Group is from the acquisitionof NANA in 2000/01 and is allocated to the cash-generating
unit LEM Japan KK. The goodwill relates to the ­Industrial
business segment. The recoverable amount has been determined based on value in use calculations. These calculations
use cash flow projections of 5 years based on financial business plans and budgets approved by management. The projections include assumptions concerning ­revenue growth andexpected operating costs. Revenue growth is projected at
2% and operating costs were estimated based on the experience of management. The discount rate used within thesecash flow calculations is 8% (2009/10 8%) and is based on
the weighted average cost of capital of a peer group. The

Two patents have been activated in the course of LEM ­Danfysik
acquisition for a total amount of CHF 5’940 thousand. For oneof them (gross value of CHF 990 thousand less CHF 330 thousand depreciation at the end of March 2011), we had plans todevelop a product.
The majority of the amortization charge of the period isrelated to the depreciation of patents acquired during thecourse of LDK acquisition. These have been accounted forin R&D costs (including the impairment charge referredabove). The depreciation charge for other intangible assets
has been included in the sales and administration expenses.

7 Other non-current assets
In CHF thousands

31.3.2011

31.3.2010

2’115
66
2’181

1’493
202
1’695

Pension asset
Other non-current assets
Total

LEM | Annual Report 2010/11

41

8 Accounts payable
In CHF thousands

31.3.2011

31.3.2010

Accounts payable – trade
Other payables
Total

27’2752’342
29’617

21’8691’547
23’416

9 Provisions
Employee and­­t ermination benefits

Claims and litigations

Restructuring

Total

Balance 1 April 2010
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectChange of scope
Balance 31 March 2011
Of which current
Of which non-current

1’353
16
(250)
(462)
(76)

704
2’236
(723)
(264)
(8)

(0)

581

1’945

(0)

2’057
2’252
(973)
(726)
(84)
0
2’526
1’556
969

Balance 1 April 2009
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effectChange of scope
Balance 31 March 2010
Of which current
Of which non-current

1’534
40
(172)
0
(49)

1’159
687
(390)
(867)
(14)
129
704

182

In CHF thousands

1’353

(94)
(86)
(2)
0
(0)

2’875
727
(656)
(953)
(65)
129
2’057
328
1’729

Employee and termination benefits
Employee and termination benefits contain obligations which are required in certain countries.
Claims and litigations
Provisions for claims and litigations cover expected warranty claims which are not covered by insurances. The provisions
have been estimated based on past experience and the risk assessment of management. The warranty provision is
expected to be used over the next five years.
10 Other liabilities
In CHF thousands

Stock option plans
Other liabilities
Total
Of which current
Of which non-current

31.3.2011

31.3.2010

1’612
1’298
2’910
2’821
89

6’255
1’182
7’437
7’335
102

Stock option plans
See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 20 Stock option plans,Performance Share Plan.

LEM | Annual Report 2010/11

42

11 Equity
Share capital
There is no authorized or conditional share capital ­o utstanding.
The nominal share capital of CHF 575’000 comprises
1’150’000 registered shares, each with a nominal value of
CHF 0.50.
Investments in shares of LEM Holding SA held by the Groupare classified as treasury shares and are accounted for at
historical cost. Treasury shares are not entitled to dividends.

30’000 call options which were acquired were intended to
be gross settled and they were therefore treated as equity
instruments.

On 4 July 2008, 12’400 shares of LEM Holding SA werepurchased at a share price of CHF 312.50. In January 2010,
63 shares were granted to a retiring employee as a pro rata
payout of the PSP. In February and March 2010, 7’105
shares were sold to employees at market value less CHF 15
discount per share with an average price of CHF 304.85.
The treasury shares were booked out at historical cost andthe difference to the selling price was booked to retained
earnings.

In March 2011, LEM exercised 5’000 call options at a CHF 360
price. The treasury shares acquired have been booked in
reduction of the equity for a total amount of CHF 2’109’000
including the initial cost paid to acquire the options.

On 31 March 2010, there were 5’232 shares remaining.

On 1 September 2010, LEM has launched a share buy-backprogram which runs for one and a half years covering a­v olume of up to CHF 15 million on a second trading line. At
31 March 2011, 10’000 shares have been bought for a total
amount of CHF 3’968 thousand. These shares are earmarked for cancellation. LEM has not bought back any additional shares since and has terminated its share buy-backprogram per 23 May 2011.

In July 2010, 600 PSP shares were pay out to a retiring former
Senior Management member. In July and August 2010,
1’385 shares were sold to employees at market value less
CHF 15 discount per share with an average price of
CHF 326.73. The treasury shares were booked out at­h istorical cost and the difference to the selling price wasbooked to retained earnings.

Terms of options
Transaction
date

Numberof options

Strikeprice

20.9.2008 15’000
20.9.2008 15’000

360
390

Premiumpaid

Exercise period

61.7 1.3.2011–30.4.2013
55.1 1.3.2012–30.4.2013

The remaining 25’000 call options on own shares have beensold in March 2011 for a total amount of CHF 5’715 thousand, which has generated a net impact of CHF 4’271 thousand in equity during the 2010/11 fiscal year.

In view of disposing of the necessary shares potentiallyrequired under the PSP program, LEM had bought call
options on own shares as shown in the table below. The

Movement of treasury shares
In CHF

Balance 1 April 2010
Movement
Balance 31 March 2011
Ordinary dividend per share
Extraordinary dividend per share

Number of shares

5’232
13’01518’24740.00
0.00

Average purchase
price

Total

312.50419.22388.62

1’635’000
5’456’113
7’091’113

The dividend to be paid will be proposed by the Board of Directors to the shareholders of the Group at the ordinary Shareholders’ Meeting 1 July 2011.
Balance 1 April 2009
Movement
Balance 31 March 2010
Ordinary dividend per share
Extraordinary dividend per share

12’400(7’168)
5’232
5.00
15.00

312.50312.50312.50

LEM | Annual Report 2010/11

43

3’875’000(2’240’000)
1’635’000

12 Non-controlling interests
In CHF thousands

Total

31.3.2011

31.3.2010

0214

The amount at 31 March 2010 represented the non-controlling interests of 10% in TVELEM, held by local management.
On 28 September 2010, TVELEM acquired its own shares representing the outstanding 10% of ownership. The ­p ercentage
of interest in TVELEM is now 100%. This increase in interest led to the recognition of CHF 18 thousand in equity ­( difference
between amount paid and non-controlling interests value) per 31 March 2011.
13 Staff cost
In CHF thousands

2010/11

2009/10

Production
Sales
Administration
Research and development
Change in liability for stock option plans and performance share plan
Total

(24’617)(12’569)(13’830)(7’989)(6’052)(65’056)(16’786)(11’519)(11’131)(7’252)(9’423)(56’111)

Salaries and wages
Other personnel costs
Temporary employee costs
Change in liability for stock option plans and performance share plan
Total

(39’123)(13’998)(5’883)(6’052)(65’056)(33’806)(11’769)(1’113)(9’423)(56’111)

Employee benefit plan costs comprise the expenses for defined contribution plans of CHF 476 thousand (2009/10
CHF 645 thousand).
See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 20 Stock option plans,Performance Share Plan.
Number of employees at the end of the financial year
Full-time employees
Temporary employees
Apprentices
Total

31.3.2011

31.3.2010

1’215
89
12
1’316

970
37
11
1’018

2010/11

2009/10

(223)
(252)
(475)

(283)
(136)
(419)

2010/11

2009/10

116
0
116

223
149
372

14 Financial expense
In CHF thousands

Interest expense
Other financial expense
Total
15 Financial income
In CHF thousands

Interest income on cash
Gain on bargain purchaseTotal

LEM | Annual Report 2010/11

44

16 Foreign exchange effect
In CHF thousands

2010/11

2009/10

Exchange losses
Fair value revaluation on derivatives
Gains and losses on derivatives 1
Total(4’664)(15)416(4’263)(1’406)(1)99(1’308)

2010/11

2009/10(10’978)
(302)
220
257
81
(10’722)(4’997)(638)
000(5’635)

1

Position includes cost of derivative hedging

17 Income taxes, deferred tax assets and liabilities
In CHF thousands

Current income taxes
Deferred income taxes
Previously unrecognized deferred tax asset used to reduce current tax expense
Previously unrecognized deferred tax asset used to reduce deferred tax expense
Adjustment recognized in the period for current tax of prior year
Total

Since the Group operates globally, it is liable for income taxes in various tax jurisdictions. Judgment is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Differences between the final tax outcome and the amounts
that were initially recorded impact the income and deferred taxes in the period in which such determinations are made.
The Group calculates its expected average tax rate as a weighted average of the tax rates in the tax jurisdictions in which
the Group operates.
The Group’s effective tax rate differs from the Group’s average expected tax rate as follows:In %2010/11

2009/10Group’s average expected income tax rate
Group’s average expected withholding tax rate
Group’s average expected tax rate

19.8
1.0
20.8

25.7
6.2
31.9

Tax effect of_ _ expense not deductible for tax purposes_ _ permanent differences_ _ reduced taxes_ _ withholding tax for results covering prior years_ _ adjustment in respect of previous periods’ income tax_ _ recognition of previously unrecorded tax losses_ _ other differences
Group’s effective tax rate

1.1
0.3
0.0
0.0
(0.2)
(0.9)
0.2
21.3

0.0
0.0
0.0
3.0
0.0
0.0
0.0
34.9

LEM has taken the decision to repatriate all available dividends from its subsidiaries in the foreseeable future. Unrecoverable withholding taxes are considered part of the expected tax rate. Deferred income tax liabilities have been established
for unrecoverable withholding taxes that would be payable on the unremitted earnings of foreign subsidiaries. At 31 March
2010, the liability for withholding taxes included a CHF 0.5 million increase covering results of prior years, c­ orresponding
to a 3.0% impact on the Group’s effective tax rate.

LEM | Annual Report 2010/11

45

Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:Deferred tax assets and liabilities
In CHF thousands

31.3.2011

31.3.2010

Deferred taxes have been calculated on the following balance sheet positions:
Current assets_ _ Accounts receivable_ _ Inventories_ _ Others
Non-current assets_ _ Property, plant and equipment_ _ Other financial assets_ _ Intangible assets
Liabilities_ _ Provisions_ _ Stock options plans and Performance Share Plan
_ _ Others_ _ Withholding tax on dividends
Total

(263)
(252)
(10)
(1)
(1’062)
(7)
(434)
(621)
(2’297)36
167
686(3’186)(3’622)

470
(346)
(217)
1’033
(949)
(36)
(305)
(608)
(3’120)
(496)
201
(144)
(2’681)(3’599)The balance sheet contains the following
Deferred tax assets

1’919

662

Deferred tax liabilities
Net liabilities(5’541)(3’622)(4’261)(3’599)31.3.2011

31.3.2010

0
0
1’038
1’038

0
0
1’725
1’725

In CHF thousands

2010/11

2009/10

Basic earnings per share
Net profit for the year attributable to LEM shareholders – In CHF thousands

39’592

10’475

1’150’000
8’655
1’141’345

1’150’000
12’004
1’137’996

34.69

9.20

Unused tax loss carry-forwards not recognized in the balance sheet which expire
In CHF thousands_ _ In the next 10 years_ _ Until 2020
_ _ Without date of expiration
Total
18 Earnings per share

Ordinary number of shares at the beginning of the year
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic in CHF

Diluted earnings per share
The employee stock option plans are cash-settled and the new performance share plan is funded with treasury
shares. There is no authorized or conditional capital outstanding.
Net profit for the year attributable to LEM shareholders – In CHF thousands
Weighted average number of shares outstanding
Performance share plan
Adjusted weighted average number of shares outstanding
Earnings per share – diluted in CHF
LEM | Annual Report 2010/11

46

39’592

10’475

1’141’345
5’964
1’147’309

1’137’996
4’030
1’142’026

34.51

9.17

19 Related parties
Related parties are the Board of Directors and the Senior Management as defined in the Corporate Governance g­ uidelines.
The compensation to the Board of Directors is paid as a fixed fee in cash. The compensation for the Senior Management
includes base salary, a performance related bonus (LIS), bonus and post employment benefits. In 2010/11, termination
benefits have been paid. The base salary is the employee’s compensation before deduction of the employee’s social
security contributions. Bonus payments are effected in cash.
Compensation of the Board of Directors
In CHF thousands

2010/11

2009/10

(640)
0
(39)
(679)

(440)
14
(877)
(1’303)

In CHF thousands

2010/11

2009/10Base salary
Bonus
Post employment benefits
Termination benefits
Change in liability for stock option plans and PSP
Total(1’473)
(965)
(160)
(443)
(2’538)(5’579)(1’351)
(718)
(182)
0
(4’507)(6’758)Base salary
Additional fees
Change in liability for stock option plans
Total

Compensation of the Senior Management

For details on the compensation of the Board of Directors and of the Senior Management, please refer to note 9 in thenotes to the financial statements of LEM Holding SA. Also, see accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 20 Stock option plans, Performance Share Plan.
20 Stock option plans, Performance Share Plan

2010/11Grant Date

Number ofoptions­o utstanding
1.4.2010

SOP 5
SOP 6

1.4.2006
1.4.2007
Total

17’35023’44440’794

0
0
0

0
0
0

(17’350)(18’492)(35’842)

2009/10Grant Date

Number ofoptions­o utstanding
1.4.2009

Number ofoptionsissuedNumber ofoptions
cancelled

Number ofoptions­e xercised

SOP 4
SOP 5
SOP 6

1.4.2005
1.4.2006
1.4.2007
Total

14’01328’75023’44466’207

0
0
0
0

0
0
0
0

(14’013)(11’400)
0(25’413)

Number ofoptionsissuedNumber ofoptions
cancelled

Number ofoptions­e xercised

Number ofoptions­o utstanding Exercise price31.3.2011
in CHF

0
4’952
4’952

Fair value at
grantin CHF139.80240.52

47.69
64.92

Number ofoptions­o utstanding Exercise price31.3.2010
in CHF

Fair value at
grantin CHF017’35023’44440’79477.18
139.80240.52

24.86
47.69
64.92

Fair value
31.3.2011
in CHF

Exerciseperiod from

Exerciseperiod until

N/A 1.4.2009 31.3.2011
325.63 1.4.2010 31.3.2012

Fair value
31.3.2010
in CHF

Exerciseperiod from

Exerciseperiod until

N/A 1.4.2007 31.3.2015
200.20 1.4.2009 31.3.2011
118.85 1.4.2010 31.3.2012

LEM | Annual Report 2010/11

47

SOP 5In April 2006 the Board of Directors issued the stock option
plan SOP 5 for the management team and the non-executive
Board of Directors.
The plan was equity-settled but has been changed to cashsettled as of 31 December 2007.
The plan gives the right to cash the countervalue of one
share at the predetermined exercise price, which corresponds to the average share price of the fourth quarter2005/06.
The number of stock options granted depended on the performance of the LEM share price compared to the SIX Index
for Small- and Mid-Cap Companies in Switzerland for thefinancial year 2005/06.
The vesting period was three years. The details of the contractual terms of the option plan can be seen in the table
above.
During the financial year 2009/10, 11’400 options were
exercised. 17’350 options related to SOP 5 were still exercisable. The average share price for the exercised options
was CHF 292.67.
During the financial year 2010/11, all 17’350 remaining
options were exercised. The plan is closed. The average
share price for the exercised options was CHF 510.46.

SOP 6
In April 2007 the Board of Directors issued the stock option
plan SOP 6 for the management team and the non-executive
Board of Directors.
The plan was equity-settled but has been changed to cashsettled as of 31 December 2007.
Each plan gives the right to cash the countervalue of one
share at the predetermined exercise price, which corresponds to the average share price of the fourth quarter
2006/07.
The number of stock options granted depends on the performance of the LEM share price compared to the SIX Index
for Small- and Mid-Cap Companies in Switzerland for thefinancial year 2006/07.
The vesting period is three years. The details of the contractual terms of the option plan can be seen in the table
above.
During the financial year 2010/11, 18’492 options were
exercised. At 31 March 2011, 4’952 options related to SOP
6 are still exercisable. The average share price for the exercised options was CHF 429.05.
The calculation with the “Hull-White” model uses the following parameters:

Parameters at grantParameters 31.3.2011

in %

SOP 6

SOP 5

SOP 6

SOP 5

Expected volatility (based on historicalvolatility over last 5 years)
Risk-free interest rate
Dividend yield

28.98

39.11

41.18

N/A

2.51
2.90

2.51
2.35

0.56
2.40

N/A
N/A

Performance Share Plan (PSP)On 27 June 2008, the Board of Directors decided to initiatea Performance Share Plan for members of the management,
whereby the number of shares granted would depend on theachievement of certain targets during a vesting period.
The targets were determined by an Economic Value Added(EVA) model, which was expected to reflect the market
growth of LEM.

At the same time, the Board of Directors approved an initialplan in favor of 30 members of management with a threeyear vesting period and for which the multiple for the eventual payout may vary between 0.5 and 2.0. The PSP
expenses have been recorded in the income statement
straight-line over the three-year vesting period.
The expense was adjusted at every reporting date basedon the expected number of shares that the participants
would receive at the end.

Terms of PSP
m (multiple)
Number of shares expected to be issued
Vesting period
Allocated to recipients
Fair value per unit (CHF)

At grant

31.3.2011

1.0
8’360
3 years
27.6.2008
303.500.92
5’964

570.00

As of 31 March 2011, based on a payout multiple (m = 0.92) and on the number of recipients, the company booked aprovision of CHF 1’556 thousand, of which CHF 631 thousand was charged to the income statement in 2010/11 (prioryear: CHF 502 thousand).

LEM | Annual Report 2010/11

48

During May 2009, the Board of Directors decided not toissue further equity based compensation plans. The ­c ompany
administrates the legacy programs until the expiry of thelast plan (SOP 6) in March 2012.
In view of this decision and in order to close the SOP 4
before the contractual term (March 2015), the Board has
made an offer to the remaining SOP 4 option holders during
2009/10. In the course of this offer, 7’105 shares were soldto employees at market value less CHF 15 discount per
share with an average price of CHF 304.85.
In July 2010, the Board has made a new offer to the ­remaining
SOP 6 option holders in order to diminish the SOP 6 before
the contractual term (March 2012). In the course of this offer,
1’385 shares were sold to employees at market value less

CHF 15 discount per share with an average price of CHF
326.73. Under the present assumptions, the remaining
8’247 shares (excluding shares acquired during the courseof the share buy-back destined for cancellation) will morethan suffice to cover the PSP payout (5’964 shares).
21 Retirement benefit obligations
The Group operates a defined contribution plan for all its
employees in Switzerland. Under IFRS, this plan is considered as a defined benefit plan.
The benefits are primarily based on years of service andlevel of compensation in accordance with local regulations
and practices.
The following table provides a reconciliation of the changes
in the net benefit obligation.

Net benefit expense
Costs related to the pension plan were charged to the ­d ifferent functional departments based on salary costs.
In CHF thousands

31.3.2011

31.3.2010

Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of gains and losses
Immediate recognition of loss § 58 A
Net benefit expense losses

2’611
866
(1’197)(1’283)
97
0
1’094

2’514
856
(1’043)(1’256)
484
0
1’555

Changes in defined benefit obligation
Defined benefit obligation per beginning of year
Interest cost
Current service cost
Cash transfer ins. / (benefits paid)
Actuarial (gains)/losses on obligation
Defined benefit obligation per end of year

28’876
866
2’611
1’630
4’179
38’162

28’544856
2’514(3’502)464
28’876

Changes in the fair value of plan assets
Fair value of plan assets per beginning of year
Expected return
Contribution by employer and employee
Cash transfer ins. / (benefits paid)
Actuarial gains/(losses) on plan asset
Fair value of plan assets per end of year

26’607
1’197
3’000
1’630
(220)
32’21423’181
1’043
2’938(3’502)
2’947
26’607

In CHF thousands

31.3.2011

31.3.2010

Present value of funded obligations
Fair value of plan assets
Funded status
Unrecognized net actuarial losses
Unrecognized asset due to limit in IAS 19 § 58 A lit b)
Net liabilities / assets (–)

38’162(32’214)
5’948(8’063)28’876(26’607)
2’269(3’762)(2’115)(1’493)

LEM expects to contribute CHF 1’752 thousand to its defined benefit plan in 2011/12.

Actual return on plan assets for 2010/11 was CHF 977 thousand (2009/10 CHF 3’990 thousand)

LEM | Annual Report 2010/11

49

Comparison of amounts
In CHF thousands

31.3.2011

31.3.201031.3.200931.3.2008

31.3.2007

Plan assets
Defined benefit obligations
Funded status
Experience gains/(losses) on plan asset
Experience adjustment (gains)/losses on obligation

32’21438’162(5’948)
(220)
1’103

26’60728’876(2’269)2’947
464

23’181
28’544(5’363)(6’705)(649)

27’25026’840410(1’304)(1’300)27’20227’066
136
(170)
786

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together
with the contribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. E­ stimatedreturns on assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation frompolicy targets is allowed.
Major categories of plan assets as a percentage of the fair value of total plan assets
In %Long-term target

2010/11

2009/10

40.0
50.0
5.0
5.0
100.0

32.0
56.0
5.0
7.0
100.0

35.0
55.0
5.0
5.0
100.0

2010/11

2009/10

3.00
1.50
0

3.00
1.50
0

6.50
3.50
2.50

6.50
3.50
2.50

In CHF thousands

31.3.2011

31.3.2010

Within one year
Between one and five years
Beyond five years
Total

4’003
19’971
14’13438’108

4’345
20’50820’321
44’832Equity securities
Debt securities
Real estate
Cash and other investments

The principal actuarial assumptions used in the actuarial calculations include:
In %Discount rate
Salary increases
Pension increases
Expected return on plan assets_ _ Equities_ _ Bonds_ _ Other assets
22 Operating lease commitments

In 2010/11 lease expenses amounted to CHF 4’496 thousand (2009/10 CHF 4’197 thousand).
Lease agreements exist for the business facilities used by the Group companies, the agreements are classified as operatingleases.
The leases have varying terms and renewal rights between one and fifteen years.

LEM | Annual Report 2010/1150

23 Contingent liabilities
In CHF thousands

31.3.2011

31.3.2010

2’000
1’601
3’601

3’206
1’866
5’072

Total guarantees for credits of subsidiaries
Total guarantees to third parties
Total

On 31 March 2011, the Group has no contingent assets. Contingent liabilities include bank guarantees on various m­ atters,
no material liability is expected to occur in the ordinary course of business.
The Group is from time to time impacted by changing political, legislative, fiscal and regulatory environments, including
those relating to environmental protection. The frequency and effects on future operations and earnings are unpredictable and are only partly covered by insurances.
24 Financial risk management objectives and policies
The group classifies its financial assets and liabilities into the following categories as per IFRS 7:
Financial assets
In CHF thousands

31.3.2011
Fair value

31.3.2010
Fair value

Loans andreceivables

Cash and cash equivalents
Accounts receivable
Other current assets
Other non-current assets
Total

27’23160’026
1’037
66
88’46729’75643’454
1’298
202
74’710X
X
X
X

In CHF thousands

31.3.2011
Fair value

31.3.2010
Fair value

Financialliabilities

Accounts payable
Accrued expenses
Other current liabilities
Current financial liabilities
Other non-current liabilities
Total

29’617
16’294
1’612
618
89
48’23023’416
10’0771’080
2
25
34’600

X
X
X
X
X

Financial liabilities

The Group enters into derivative transactions such as currency risk reversal contracts to hedge the USD and EUR risks.
The purpose of these currency hedges is to manage the currency risks arising from the Group’s operations.
It is the Group’s policy that no derivatives for speculative purposes shall be entered into.
The main risks arising from Group’s financial instruments are foreign currency risks and credit risks, whereas the others
are of minor or no impact.
The Board of Directors reviews and agrees policies for managing each of those risks.

LEM | Annual Report 2010/11

51

Fair value hierarchy
The Group uses the following hierarchy for determining anddisclosing the fair value of financial instruments by valuation
technique:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: inputs other than quoted prices included within level1 that are observable for the asset or liability, either directly(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on
observable market data.
The Group’s financial liabilities at fair value amount to
CHF 12 thousand per 31 March 2011 (financial assets of CHF
7 thousand per 31 March 2010), they are all classified underlevel 2. D
­ uring the two last reporting periods, there were no­transfers between level 1 and level 2 fair value measurements,
and no transfers into and out of level 3 fair value measurements.
Foreign currency risk
The Group operates globally and is exposed to various foreignexchange risks primarily to the USD, EUR, GBP, JPY and CNY.
The Group seeks to reduce those risks by optimizing its
natural hedging (cash inflows and outflows in a specific­c urrency should be in balance as far as possible).
The Group’s policy stipulates that about 50% of LEM’s net
exposure is to be hedged on a rolling three- to nine-month
basis.
It is the Group’s policy to negotiate the terms of the hedge
derivatives to match the terms of the hedged items, andtherefore to maximize the hedge effectiveness.
Currency risks also arise from translation differences thatare not hedged by the Group when preparing the consolidated financial statements in CHF. The foreign exchangetranslation is excluded from the calculation of the ­s ensitivity
analysis for currency risk below.
Sensitivity analysis for currency risk
The sensitivity analysis is performed with a 5% change inthe USD, EUR, GBP, CNY and JPY with all other variables
held constant of the Group’s profit before tax (due to thechanges in the fair value of the monetary assets and liabilities) and the Group’s equity.

The sensitivity analysis performed for the financial year
shows an impact of CHF 895 thousand for a ±5% EUR ratechange (CHF ± 914 thousand), of CHF ±813 thousand for
a ±5% USD rate change (CHF ±356 thousand) and of CHF±498 thousand for a ±5% CNY rate change. For other currencies, there is no significant impact. There is no significant
impact on the Group’s equity.
Credit risk
The Group trades with recognized and creditworthy parties.
The accounts receivable are monitored on a monthly basis.
It is the Group’s policy that all customers who wish to tradeon credit terms are subject to credit verification procedures.
In case of a deterioration of the credit history, advance payments are required.
The Group’s exposure to bad debts is not significant, themaximum exposure is the carrying amount as disclosed innote 1.
There are no significant concentrations of risk within theGroup.
With respect to credit risk arising from the other financial
assets in the Group, which comprises cash and cash
­e quivalents, other current assets and certain derivative
instruments, the Group’s exposure to credit risks arises fromdefault of the counterparty, with a maximum exposure equal
to the carrying amount of these positions.
Liquidity risk
The Group operates a cash pooling agreement in which cash
targets are set for all the subsidiaries. Cash surplus/shortages are balanced in intercompany loans on a monthly
basis.
Group capital requirements are managed centrally by corporate finance. In case liquidity is required a bank loan iseither done centrally and passed on as an intercompany
loan, or given directly by the bank to the subsidiary with areduction of the Group’s total credit line.
The total leverage of the Group is low, the financial liabilities
mature in less than one year based on the carrying value ofborrowings reflected in the financial statements.

Financial liabilities
In CHF thousands

31.3.2011

Accounts payable
Accrued expenses
Other current liabilities
Current financial liabilities
Other non-current liabilities
Total

29’617
16’2942’821
618
89
49’439

LEM | Annual Report 2010/11

52

Less than
one yearOver one year

31.3.201089
89

23’416
10’0771’080
2
25
34’60029’617
16’294
2’821
618
49’350Less than
one year

23’416
10’0771’080
234’575

Over one year

0
0
0
0
25
25

Interest rate risk
The Group’s exposure to the risk of changes in market­i nterest rates with the current financial leverage is very low.
­C urrently, there are no significant interest-bearing financial
liabilities and no significant interest rate risk.
Capital management
The primary objective of the Group’s capital management isto ensure that it maintains a healthy and stable equity ratio inorder to secure the confidence of shareholders and i­ nvestors,

creditors and other market players and to strengthen the
future development of the Group’s business activities.
The Group manages its capital structure and makes adjustments to it, in light of changes in the economic conditions.
LEM targets a pay-out ratio significantly above 50% of theconsolidated net profit for the year.
However, it may diverge from this policy due to economic
prospects or on the grounds of planned future investment
activities.

25 Scope of consolidation
Full consolidation

Country

Currency

Share Capital

Participation

EuropeLEM Belgium sprl-bvba
LEM Deutschland GmbHLEM France Sàrl
LEM Holding SA
LEM International SA
LEM Italia Srl
LEM SALEM UK Ltd
TVELEM Ltd
LEM Management Services Sàrl
LEM Danfysik A/S

Belgium
Germany
FranceSwitzerland
Switzerland
Italy
Switzerland
Great Britain
RussiaSwitzerland
Denmark

EUR
EUR
EUR
CHF
CHF
EUR
CHF
GBP
RUB
CHF
DKK

60’00075’000240’000
575’000
100’000
25’0008’500’000
2
200’000
20’0002’000’000

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

North America
LEM USA Inc.

USA

USD

150’000

100%

Asia
Beijing LEM Electronics Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

53’153’194
16’000’000

100%
100%

On 28 September 2010, the Group as acquired the remaining 10% non-controlling interests in TVELEM, the percentage
of interest in TVELEM is now 100%. This increase in interest led to the recognition of CHF 18 thousand in equity (difference between amount paid and non-controlling interests value) per 30 September 2010.
26 Changes in scope of consolidation
In the previous year the following change in the scope of
consolidation occurred:_ _ Acquisition of 100% of LEM Danfysik A/S in Denmark on
28 July 200927 Events after the balance sheet date
As referred in note 11. Equity, in September 2010, LEM
launched a share buy-back program for up to CHF 15 million through a second trading line. The Board of Directors
decided to close the share buy-back program. The Boardof Directors proposes to cancel the repurchased shares.
Going forward the company will focus on the new dividend
policy as a means to return funds to shareholders.

LEM | Annual Report 2010/11

53

Auditors Report
Report of the statutory auditor on the consolidated
financial statements
As statutory auditor, we have audited the accompanying
consolidated financial statements of LEM Holding SA, which
comprise the statement of financial position, income statement, cash flow statement, statement of comprehensive
income, statement of changes in equity and notes (pages
28 to 53), for the year ended 31 March 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparationand fair presentation of the consolidated financial statements in accordance with International Financial ReportingStandards (IFRS) and the requirements of Swiss law. This
responsibility includes designing, implementing and maintaining an internal control system relevant to the preparationand fair presentation of consolidated financial statementsthat are free from material misstatement, whether due tofraud or error. The Board of Directors is further responsible
for selecting and applying appropriate accounting policies
and making accounting estimates that are reasonable in thecircumstances.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law, Swiss ­A uditingStandards and International Standards on Auditing. Thosestandards require that we plan and perform the audit toobtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit­e vidence about the amounts and disclosures in the consolidated financial statements. The procedures selected
depend on the auditors judgment, including the assessmentof the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In m
­ aking

Hans Isler
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2010/11

those risk assessments, the auditor considers the internal
control system relevant to the entity’s preparation and fairpresentation of the consolidated financial statements inorder to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control
system. An audit also includes evaluating the ­a ppropriatenessof the accounting policies used and the reasonableness ofaccounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is­s ufficient and appropriate to provide a basis for our audit­o pinion.
OpinionIn our opinion, the consolidated financial statements for theyear ended 31 March 2011 give a true and fair view of thefinancial position, the results of operations and the cash
flows in accordance with IFRS and comply with Swiss law.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on ­l icensing
according to the Auditor Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there
are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and
Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the
preparation of consolidated financial statements according
to the instructions of the Board of Directors.
We recommend that the consolidated financial statements
submitted to you be approved.
Lancy, 17 May 2011
Ernst & Young Ltd

Philippe Stöckli
Licensed audit expert

54

LEM Holding SA
Balance Sheet . . ......................................................... 56
Income Statement . . ................................................... 57
Notes to the Financial Statements ............................. 59
Proposed Appropriation of Retained Earnings . . .......... 64
Auditors report . . ........................................................ 65

LEM | Annual Report 2010/11

55

Balance Sheet of LEM Holding SA(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.2011

31.3.2010

9’947
7’091
0
62
8’687
25’787

5’221
1’635
1’752
597
22’39231’597

53’63053’63051’69451’69479’41783’291

31.3.2011

31.3.2010

614
2’238
12’43315’285

0
4’795
5’414
10’209

0
0

250
250

575
22’580
7’091
19’683
14’20364’132575
26’284
3’387
17’52025’066
72’832

79’41783’291

Current assets
Cash and cash equivalents
Treasury shares
Derivative instruments on treasury shares
Other current assets
Group current assets
Total current assets

2
2
4

Non-current assets

Investments in subsidiaries
Total non-current assets

3

Total assets

Liabilities and Equity
In CHF thousands

Notes

Current liabilities
Current financial liabilities
Other current liabilities
Group current liabilities
Total current liabilities

4

Non-current liabilities
Non-current liabilities
Total non-current liabilities
EquityShare capital
General reserve
Reserve for treasury shares and derivative instruments on own shares
Retained earnings
Net profit for the year
Total equity
Total liabilities and equity

LEM | Annual Report 2010/11

56

1
2

Income Statement of LEM Holding SA

IncomeIn CHF thousands

Notes

2010/11

2009/10

6’582
229
4’802
4’391
0
16’00420’467
256
3’849
4’815
3
29’390Notes

2010/11

2009/105(1’350)(299)(1’236)(2’885)(1’453)(179)(410)(2’042)

13’11927’3481’084
14’203(2’282)25’066

Financial income from Group dividend payments
Interest income from Group loans
Other financial income
Other Group income
Foreign exchange gain
Total income

Expense

Office, administration and personnel expense
Financial expense
Foreign exchange effectTotal expense
Profit before taxes
Income taxes
Net profit for the year

6

LEM | Annual Report 2010/11

57

LEM Holding SA
Notes

LEM | Annual Report 2010/11

58

Notes to the Financial Statements of
LEM Holding SA
Principles for the establishment of the financial statements
The accompanying financial statements have been prepared in accordance with the requirements of the Swiss Code ofObligations. Regarding the inclusion of LEM Holding SA in the consolidated financial statements, the accounting andreporting principles described in the notes to the consolidated financial statements apply.
1 Share capital
Number of shares

Par value pershare in CHF

Capital in CHF
thousands

1’150’000
1’150’000

0.50
0.50

575
575

Number of shares

Price pershare in CHF

Value in CHF
thousands

Value 1 April 2010
ChangeValue 31 March 2011

5’232
13’01518’247312.50419.22388.62

1’635
5’456
7’091

Value 1 April 2009
ChangeValue 31 March 2010

12’400(7’168)5’232

312.50312.50312.50

3’875(2’240)
1’635

Opening capital 1 April 2010
Closing capital 31 March 2011
2 Treasury shares and derivative instruments on own shares
Treasury shares

In July 2008, 12’400 shares of LEM Holding SA were purchased at a share price of CHF 312.50. In January 2010, 63
shares were granted to a retiring employee as a pro rata
­p ayout of the PSP. In February and March 2010, 7’105 shareswere sold to employees at market value less CHF 15 discountper share with an average price of CHF 304.85. The purpose
was to close the SOP 4 before the contractual term (31 March
2015). The treasury shares were booked out at historical cost
and the difference to the selling price was booked to the profit
and loss account (net impact CHF 50 thousand).
In August and September 2010, 1’385 shares were soldto employees at market value less CHF 15 discount per
share with an average price of CHF 326.73. The purpose
was to diminish the SOP 6 before the contractual term (31March 2012). The treasury shares were booked out at historical cost and the difference to the selling price wasbooked to the profit and loss account (net impact
CHF 55 thousand).

In September 2010, 600 PSP shares were paid out to a­f ormer Senior Management member.
On 1 September 2010, LEM has launched a share buy-backprogram which runs for one and a half years covering a­v olume of up to CHF 15 million on a second trading line. At
31 March 2011, 10’000 shares have been bought for a total
amount of CHF 3’968 thousand. These shares are earmarked for cancellation. LEM has not bought back any additional shares since and has terminated its share buy-backprogram per 23 May 2011.
Derivative instruments on treasury shares
On 30 September 2008, LEM has purchased 30’000 call
options on LEM shares at a premium of CHF 1’752 thousand. LEM exercised 5’000 options on own shares in March2011 and sold the remaining 25’000 call options for CHF
5’715 thousand. Treasury shares and derivative instrumentson own shares are valued at lower of cost or market value.

LEM | Annual Report 2010/11

59

3 Investments in subsidiaries
In CHF thousands

31.3.2011

31.3.2010

Historical cost
Total

53’63053’63051’69451’69431.3.2011

31.3.2010

Current intercompany loans receivable
Intercompany accounts receivable
Total

7’720
967
8’687

17’741
4’651
22’392Current inter-company loans payable
Inter-company accounts payable
Total

12’37855
12’433

4’743
671
5’414

In CHF thousands

2010/11

2009/10

Office and administration expense
Board member fees
Expenses for stock option plans exercised
Change in provision for stock option plans
Total

(650)
(640)
(60)
0
(1’350)

(388)
(440)
(153)
(472)
(1’453)

In CHF thousands

2010/11

2009/10

Current taxes
Release of unused tax provisions of previous periods
Withholding taxes on dividends
Total

(684)
1’936
(168)
1’084

(302)
(241)
(1’738)(2’281)

See also note 25 “Scope of consolidation” of the consolidated financial statements.
4 Group current assets and liabilities
In CHF thousands

5 Office, administration and personnel expense

6 Income taxes

7 Important shareholders according to art. 663c of the Swiss company law
31.3.2011
Shareholder with ownership above 3%:

Werner O. Weber and WEMACO Invest AG, in Zollikon/Zug, Switzerland
Ruth Wertheimer, in Kfar, Israel, through 7-Industries Holding B.V.,
in Amsterdam, Netherlands
Sarasin Investmentfonds AG, in Basel, Switzerland
Erwin Studer and Joarem de Chavonay, in Zollikon/Zug, Switzerland
Amerprise Financial Inc., in Minneapolis, US, through Threadneedle
Asset Management Ltd, in London, United Kingdom
Montanaro Asset Management Ltd, London, United Kingdom
Impax Asset Management Ltd

LEM | Annual Report 2010/11

60

31.3.2010

Sharesin %Sharesin %342’500
144’581

29.8%
12.6%

315’000
144’581

27.4%
12.6%

96’15583’00060’003

8.4%
7.2%
5.2%

101’690
69’000122’444

8.8%
6.0%
10.6%

42’772
37’194

3.7%
3.2%

0
51’701

0.0%
4.5%

8 Guarantees in favor of third parties on behalf of subsidiaries
In CHF thousands

31.3.2011

31.3.2010

3’601

11’852

Additional fees

Cash-out for options
granted in prior years

Amount of guarantees issued
9 Remuneration of Board of Directors and Senior Management
9.1 Compensation of active members of the Board of Directors
2010/11
Annual salarycompensation

In CHF thousands

Felix Bagdasarjanz 1, 2
Anton Lauber 3Peter Rutishauser 4
Ueli Wampfler 5Ilan Cohen
Total

200
110
150
100
80
640

–
–
–
–
–

108
103
276
–
–
487

Annual salarycompensation

Additional fees

Cash-out for options
granted in prior years

160
90
110
80
440

–
–
–
14
14

250
85
109
–
444

2009/10
In CHF thousands

Felix Bagdasarjanz 1, 2
Anton Lauber 3Peter Rutishauser 4
Ueli Wampfler 5
Total
The members of the Board of Directors do not participate
in bonus schemes, pension funds, nor in the Performance
Share Plan (PSP). The annual salary compensation is therefore equal to the total compensation. In 2009/10, Felix Bagdasarjanz and Peter Rutishauser were granted an additional
annual salary compensation of CHF 20’000 each for additional efforts in the role and duties as members of the Boardof Directors. No member of the Board of Directors received
additional fees amounting to more than half of his normalcompensation.

Chairman of the Board
Member of the Nomination and Compensation Committee
3
Chairman of the Nomination and Compensation Committee
4
Vice Chairman of the Board and Chairman of the Audit Committee
5
Member of the Audit Committee
1
2

LEM | Annual Report 2010/11

61

9.2 Compensation to active members of the Senior Management of the LEM Group
2010/11

In CHF thousands

Annual­s alary compensation

Annualbonus compensation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

Severance
payment

338

318

34

0

1’135
1’473

647
965

126
160

295
295

Annual­s alary compensation

Annualbonus compensation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

400

204

80

951
1’351

514
718

102
182

François Gabella
President and CEO as of 1 July 2010
Senior Management (excl. CEO)
Total compensation to Senior Management

Total compensation

Cash-out
for options
granted inprior years

Pay-out of
PSP shares
granted inprior years

0

690

N/A

N/A

148
148

2’351
3’041

5’168
5’168

600
600

Severance
payment

Total compensation

Cash-out
for options
granted inprior years

Pay-out of
PSP shares
granted inprior years

0

0

684

1’903

0

0
–

0
–

1’567
2’251

808
2’711

0
–

2009/10

In CHF thousands

Paul Van Iseghem
President and CEO
Senior Management (excl. CEO)
Total compensation to Senior Management

In May 2009, the Board of Directors decided not to issue
any further equity programs (stock option plans or PSP).
The company administrates the legacy programs until the
expiry of the last plan (SOP 6) in March 2012. CEO François
Gabella and CFO Julius Renk do not participate in the stock
option program and in the PSP.
For more information on performance share plan and stock
option plans, see note 20. Stock option plans and performance share plan in the consolidated accounts.

LEM | Annual Report 2010/11

62

Highest total compensation
CEO François Gabella was the Senior Management member
with the highest total compensation in 2010/11. In 2009/10,
the former CEO Paul van Iseghem was the Senior Management member with the highest total compensation. For
compensation details, please refer to the table above.
The annual bonus compensation is shown with the corresponding accrualfor the performance of the current year, to be paid out in the following year.
All other elements are shown as paid out.

1

9.3 Shareholdings
31.3.2011

31.3.2010

In number of shares / options

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Board of Directors
Felix Bagdasarjanz 1, 2
Anton Lauber 3Peter Rutishauser 4
Ueli Wampfler 5Ilan Cohen
Total

1’736
1’000
2’606
23’000028’342

0
0
0
0
0
0

1’400
1’000
2’300
12’0000
16’700

1’125
938
1’338
0
0
3’401

Chairman of the Board
Member of the Nomination and Compensation Committee
3
Chairman of the Nomination and Compensation Committee
4
Vice Chairman of the Board and Chairman of the Audit Committee
5
Member of the Audit Committee
1
2

Senior Management

31.3.2011

In number of shares/options

Number ofshares held
by PSP(m = 1)

Paul Van Iseghem
President and CEO LEM Group,
until 30 June 2010
(employed until 30 November 2010)
François Gabella
President and CEO as of 1 July 2010
Julius Renk
CFO as of 1 September 2009
Hans-Dieter Huber
Vice-President Industrial
Luc Colombel
Vice President, Automotive
Simon Siggen
Vice President, Operations
Eric Favre
Vice President, Technology, until 31 October 2010
(employed until 30 April 2011)
Jean-Marc Peccoux
Vice President, R&D as of 1 November 2010
Total

Number ofshares held

Number ofoptionsheld

31.3.2010

Number ofshares held

Number ofoptions
heldNumber ofshares held
by PSP(m = 1)

2’912

5’250

1’200

300

0

0

50

0

0

0

0

0

796

500

600

796

3’500

600

1’350

1’500

600

1’400

2’500

600

850

0

500

850

2’625

500

0

2’625

500

5’958

16’500

3’400

764

938

380

4’110

2’938

2’080

10 Business risk management
In accordance with Article 663b of the Swiss Code of obligations, a risk management report was prepared for thefinancial year 2010/11. The Senior Management of the Groupassesses the business risks within its standardized analysis­p rocedure. The Group has a risk management system inplace which allows for the prompt identification and analysis

of risks as well as the initiation of an action plan. The Boardof Directors of LEM Holding SA took note of the risk manage­
ment report and approved both the procedure and the content thereof. The organization, principles and reporting ofrisk m­ anagement are described in detail in the Corporate
Governance section 3 in this Annual Report.

LEM | Annual Report 2010/11

63

Proposed Appropriation of
Retained Earnings
Proposed appropriation of retained earnings
In CHF thousands

31.3.2011

31.3.2010

Retained earnings brought forward from previous year
Reclassification of general reserve
Net income for the year
Total available earnings

19’69122’292
14’20356’186

17’520Ordinary dividend 1
Extraordinary dividend 1
Balance to be carried forward(45’270)(5’724)(17’171)
19’691

1

10’916

Excluding dividends on own shares held by LEM Holding SA

		The Board of Directors proposes the distribution of an­o rdinary dividend of CHF 40 per share.		
Net of 35% withholding tax, this is an ordinary cash dividendof CHF 26 per share.
The proposed reclassification from general reserve into available earnings and appropriation of available earnings is madein compliance with article 671 of the Code of Obligations.

LEM | Annual Report 2010/11

64

25’06642’586

Auditors report
Report of the statutory auditor on the financial­s tatements
As statutory auditor, we have audited the accompanying
consolidated financial statements of LEM Holding SA, which
comprise the balance sheet, income statement and notes(pages 56 to 64), for the year ended 31 March 2011.
Board of Directors’ responsibility
The Board of Directors is responsible for the preparation of
the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing
and maintaining an internal control system relevant to the
preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Boardof Directors is further responsible for selecting and applying
appropriate accounting policies and making accounting
estimates that are reasonable in the circumstances.
Auditors responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit inaccordance with Swiss law and Swiss Auditing Standards.
Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditors judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, theauditor considers the internal control system relevant to theentity’s preparation of the financial statements in order toHans Isler
Licensed audit expert(Auditor in charge)

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control system.
An audit also includes evaluating the appropriateness of theaccounting policies used and the reasonableness ofaccounting estimates made, as well as evaluating the ­o verall
presentation of the financial statements. We believe that theaudit evidence we have obtained is sufficient and a­ ppropriate
to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended
31 March 2011 comply with Swiss law and the company’s
articles of incorporation.
Report on Other Legal Requirements
We confirm that we meet the legal requirements on ­l icensing
according to the Auditor Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there
are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and
Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the
preparation of financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s
articles of incorporation. We recommend that the financial
statements submitted to you be approved.
Lancy, 17 May 2011
Ernst & Young Ltd

Philippe Stöckli
Licensed audit expert

LEM | Annual Report 2010/11

65

Information for Investors
Number of registered shareholders
1–499
500–4’999
5’000–49’999
50’000 and more
Total

31.3.2011

31.3.2010

524
63
10
6
602

327
67
10
6
410

31.3.2011

31.3.2010

51.1
30.9

54.2
31.7

2.9
1.6
13.5
100.0

2.0
0.5
11.6
100.0

Shareholders by category
In %Institutional shareholders
Private individuals
LEM employees, managers and board
Treasury shares
Nonregistered shares
Total

Share information
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)

LEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2’242’762

In CHF

Number of sharesYear high 1
Year low 1
Year end 1
Average daily trading ­v olume (shares) 1
Earnings per share
Ordinary dividend per share 2
Extraordinary dividend per share 2
Market capitalization as per 31 MarchFY 2010/11

FY 2009/10

1’150’000
649.50315.00570.00
1’078
34.69
40.00
0.00
656

1’500’000
340.00137.00340.00
494
9.20
5.00
15.00
391

(In CHF millions)1
2

Source: Bloomberg
Proposal of the Board of Directors to the Shareholders’ Meeting

Financial calendar of the financial year
1 April 2011, to 31 March 2012
1 July 2011

Ordinary Shareholders’ Meeting
Geneva Business Center, Petit Lancy
Firstquarter results 2011/12
Half-year results 2011/12
Ninemonth results 2011/12
Year-end results 2011/12
Ordinary Shareholders’ Meeting

9 August 2011
8 November 201114 February 2012
6 June 201228 June 2012
Contact
Julius Renk (CFO)
Phone +41 22 706 12 50
E-mail investor@lem.com

LEM | Annual Report 2010/11

66

Group Subsidiaries
LEM is a global player with production plants and development centers in Geneva (Switzerland), Copenhagen (Denmark), Beijing (China) and Machida (Japan) as well as adaptation centers in Russia and the US. The company has sales
offices at all its clients’ locations and offers seamless service
around the globe.
For a complete list of subsidiaries, offices and representatives, refer towww.lem.com > Contact > Sales Locator

Beijing LEM Electronics. Co. Ltd
No. 28 Linhe Str.
Linhe Industrial Development Zone
CN-Shunyi, 101300 Beijing> Zonghui Zhang

LEM Management Services Sàrl
Chemin des Aulx 8CH-1228 Plan-les-Ouates> François Gabella

LEM Belgium sprl-bvba
Route de Petit-Roeulx 95
B-7090 Braine-le-Comte> Paul Leens

LEM Management Services Sarl – India Branch
Level 2, Connaught Place
Bund Garden Road
IN-411 001 Pune
> Martin Hoffmann

LEM Danfysik A/S
Hassellunden 16
DK-2765 Smoerum> Henrik Elbaek Pedersen

LEM Japan KK
2-1-2 Nakamachi, Machida
JP-194-0021 Tokyo> Hiroaki Mizoguchi

LEM Deutschland GmbH
Frankfurter Strasse 74
D-64521 Gross-Gerau> Graffert Hartmut

LEM SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates> Simon Siggen

LEM France Sàrl
15, avenue Galois
F-92340 Bourg-la-Reine> Paul Leens

LEM UK Ltd
West Lancs Investment Centre
Maple View
White Moss Business Park
UK-Skelmersdale WN8 9TG, Lancashire> Paul Leens

LEM Holding SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates> François Gabella
LEM International SA
Chemin des Aulx 8CH-1228 Plan-les-Ouates> François Gabella
LEM Italia Srl
Via V. Bellini 7
I-35030 Selvazzano Dentro, PD> Paul Leens

LEM USA Inc.
11665 W. Bradley Road
USA–Milwaukee, Wisconsin 53224> Kimbel A. Nap
TVELEM Ltd
P.O. Box 18
Marshal Budionny Str. 11
RU-170023 Tver
> Evgeny Maramygin

LEM | Annual Report 2010/11

67

Impressum
LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax +41 22 794 94 78
Concept and text
LEM
IRF Communications, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
ImagesLEM
Frank Mentha
David Quattrocchi
Aurélien Bergot / Pedro NetoWhitebalance Studio
Printing
Cavelti, Gossau

LEM | Annual Report 2010/11

69

Postal address
LEM Holding SA
P.O. BOX 785
CH-1212 Grand-Lancy 1

Visitors’ address
LEM Holding SA
8, chemin des Aulx
CH-1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax +41 22 794 94 78
www.lem.com

LEM | Annual Report 2010/1170