Annual Report
2011/12At the heart of power electronics

LEM | Annual Report 2011/12

1

Plasma cutting How do you cut steel orother metals? There are different methods to do it: besides mechanical methods, for example sawing, the industry
also uses gas or laser techniques.
Plasma cutting uses a “plasma torch”. In this process, aninert gas (in some units, compressed air) is blown at highspeed out of a nozzle; at the same time an electrical arc isformed through that gas from the nozzle to the surface being
cut, turning some of that gas to plasma. The plasma is hot
enough to melt the metal being cut and moves sufficiently
fast to blow molten metal away from the incision.
How do you form an electrical arc? You make a contact bytouch to the metal and then move a few millimetres awayfrom the metal. In that way the arc is formed and can melt
the metal.
To maintain the arc continuously, the current through the arc
is measured by a current transducer that feeds the value ofthe current back to a control unit, which regulates it using
modern IGBTs (Isolated Gate Bipolar Transistors) to ensure
the current intensity of the arc. The accuracy of the measurement is important to guarantee the accuracy and shape ofthe cut.

1
A

LAH

2

3

2

4

A
1
2
3
4

LEM | Annual Report 2011/12

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LAH
Electronic
Motor
Torch
XY-tableTable of Contents
LEM at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6Foreword...............................................

8

Business Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

LEM’s Core Values

14....................................

Corporate Governance Report.......................

15

Compensation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28

LEM Group
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . .

31

LEM Holding SA
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61

Information for Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72

Group Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73

Reporting period 1 April 2011 to 31 March 2012

LEM | Annual Report 2011/12

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LEM | Annual Report 2011/12

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Electric plug-in cars
Battery management
The sensor is the key element to measure the autonomy of
the car. It measures the current in and out of the battery packand hence the units of energy available to be consumed. This
information helps to calculate the remaining distance thatcan be driven based on the current battery charge.
Electric motor management
These sensors are used to manage the converter and/or
inverter. The information provided by these sensors is used
to adjust the drive performance to the speed required by thedriver.
Charger management
The sensor is used as a safety part of the car; it is the key
element of the DC circuit breakers. It measures the leakage
current that can occur during the charging phase. The same
sensor may also be used for battery pack measurement. Dueto its high accuracy it can provide much better informationand thereby help to increase the autonomy of the car or
reduce the cost of the battery pack.

HAH1

DHAB

D

HC5F

CAB
1

B

3

A

D
2

4
7

5

1

C

2
C

A

3
4

A

5
6

A
B
C
D

HAH1
DHAB
HC5F
CAB

LEM | Annual Report 2011/12

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7

5

High-voltage battery
Vehicle control unit
Charger
Motor controller
Electric motor andtransaxle
DC/DC converter
Electric power
steering

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 visible
to the outside world, they are vital for application functionality 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 converters, uninterrupted power supply systems for computers as well as in new innovative energy
applications like micro-turbines and wind and solar power
generation. In addition, new opportunities have been developed in the automotive market for battery management andelectrical motor controls for steering and braking systems.
This evolution underscores the company’s exceptional skills
in adapting to rapidly changing industrial trends, such as
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 customer focus and operational excellence by running costeffective and service-oriented production platforms. Profitable growth is a key objective.

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

Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
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 2011/12

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Key figures
In CHF millions

2007/08

2008/09

2009/102010/112011/12

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

203.0
34.9
17.2%
21.9

196.8
29.2
14.8%
23.9

185.5
25.8
13.9%
10.5

296.2
60.4
20.4%
39.6

236.3
34.2
14.5%
28.5

Shareholders’ equity
Equity ratio (in % total assets)
Net financial assets (+) / liabilities (-)

71.2
61.4%
23.7

83.5
71.8%
27.9

83.4
62.9%
29.8

96.9
59.8%
26.6

79.6
60.0%
18.1

Operating cash flow
Investing cash flow

24.1
-6.5

30.9
-9.1

26.3
-13.3

30.0
-9.4

46.7
-9.1

Market capitalization (per 31 March)
Employees (FTEs)

310.5
996

172.4
909

391.0
1'018

655.5
1'316

563.7
1'136

Sales over 5 years per segment

Regional sales breakdown 2011/12

In CHF millions

300

Rest of the World
4%

275
250
225

Asia
32%

200
175
150
125

Europe
46%

100
75
50

North America
18%

25
0
07/08

08/09

09/10

10/11

11/12

Industrial Segment
Automotive Segment

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

700

600

500

400

300

200

LEHN

100

SPI

0
1.4.071.10.071.4.081.10.08

1.4.091.10.09

1.4.101.10.101.4.11

1.10.11

Source: Bloomberg

LEM | Annual Report 2011/12

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30.4.12Foreword
Dear Shareholders,
Fiscal year 2011/12 was the second best in LEM’s history, even though it was characterized by a correction after an exceptionally strong 2010/11. The global economic slowdown and the increased
uncertainty about the short-term business prospects, particularly in the volatile renewable energies
business, made most customers reduce their activity levels. As a consequence, we recorded a strong
reduction of bookings and sales. The appreciation of the Swiss franc also negatively affected our
performance. Adjusting and managing cost and capacity in a situation with limited market visibility
was our biggest challenge last year. We reacted by introducing cost cutting measures early summer
2011 which we stepped up in autumn 2011. We continued to invest in innovation and operational
excellence to further strengthen our competitive advantage.
LEM demonstrated its resilience against the adverse market factors. Bookings started to recover in
Q4 of 2011/12, while sales stabilized at a lower level. For the full year 2011/12, sales reached CHF
236.3 million, a decrease of 20% compared to the previous year. At constant exchange rates sales
decreased by 12%. Orders received were CHF 182.9 million. In the Industry segment our businessin renewable energies was most heavily hit, while the Automotive segment continued on its growth
path for the conventional and green cars businesses.
Despite the adverse market conditions, LEM reached an operational EBIT of CHF 34.2 million. The
operational EBIT margin of 14.5% was slightly below our target range of 15 to 20%.
Our continued efforts to improve the Group’s structure resulted in a lower effective tax rate in 2011/12.
We posted a net profit of CHF 28.5 million.
Fourty years LEM: built on a strong foundation
Fourty years ago, in February 1972, Jean-Pierre Etter founded ”Liaisons Electroniques-Mécaniques LEM SA“
in Carouge, Geneva. Jean-Pierre Etter, his brother and a few friends designed the first transducer intheir kitchen. Only one year later, the first 300A current transducer was integrated into Swiss trolleybuses. From that time, transducers made inroads into traction markets worldwide before being usedin most motor drives applications, LEM’s growth driver since its early years.
Today, we are a leading global company and the number one in our market. We operate production
plants in China, Switzerland and Japan as well as a distribution network across the globe in all industrial regions. LEM China is the Group’s largest manufacturing site. 74% of the total workforce is
employed outside of Switzerland. Europe remained our most important market with 46% of total
sales. Asia increased its share of sales to 32% and is expected to stay our most important growthmarket.
Extension of the Board of Directors
We expanded our Board of Directors during the past year with the election of Andreas Hürlimann­(M. Sc. EE ETH) as a new member. Andreas Hürlimann is an independent board professional andentrepreneur. He brings a wide range of industry management experience combined with strategic
leadership and talent advisory know-how to the Board of Directors.

LEM | Annual Report 2011/12

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Proposals to the annual shareholders’ meeting
As a consequence of our strong balance sheet and the confident outlook for profitable growth, theBoard of Directors will propose to the annual shareholders’ meeting on 28 June 2012 the paymentof an ordinary dividend of CHF 25 per share. The payment corresponds to a payout ratio of 99.7%.
It follows LEM’s dividend policy to distribute significantly more than 50% of the consolidated net profit
to the shareholders.
As LEM is becoming an increasingly global company with the majority of its employees outside Switzerland, we intend to further clarify the roles between the sites which are providing R&D, manufacturing and support services to the Group on one side and the Group management itself which isrepresented by LEM Holding. Also, in order to reinforce our global intellectual property strategy, we
have established LEM Intellectual Property in Fribourg. As a consequence of the above, the Boardof Directors will propose to the shareholders to transfer the seat of LEM Holding SA to Fribourg.
Thank you
The volatile business environment called for major efforts from all our employees. We fully acknowledge their contribution and thank them all for their extraordinary support during this tough year.
Our thanks also go to our customers for their trust in our products and services as well as to ourshareholders for their long-term investment and trust in the promising future of our company.

Felix Bagdasarjanz
Chairman of the Board of Directors

François Gabella
Chief Executive Officer

LEM | Annual Report 2011/12

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Business Report
Second-best result in LEM’s history

ments in the renewable energies production equipment offset

Beginning Q4 of 2010/11 our markets weakened as a result

the efficiency improvements in production.

of the European debt crisis and the global economic crisis.
In 2011/12, most of our Industry segment slowed down with

Our cost reduction plan helped reduce sales, general & admin-

the renewable energies business affected the most. But theistrative spending (SG&A) by 5.0% to CHF 62.3 million. How-

Automotive segment achieved a record result. The appre-

ever, due to the lower sales volumes, SG&A increased as a

ciation of the Swiss franc had negative effects on sales andproportion of sales from 22.2% in 2010/11 to 26.4% in 2011/12.

profitability. Nevertheless, after an extraordinary 2010/11,

Operational EBIT reached CHF 34.2 million (-43.4%). The

LEM recorded the second-best result in its history.

operational EBIT margin was 14.5%, slightly below our target
range of 15 to 20%.

In 2011/12, the company again demonstrated its ability toadapt its cost and capacity level and to remain clearly prof-

Additional stock option plan cost/income amounted to CHF

itable even in difficult market conditions. We reacted quickly

0.3 million, directly linked to the share price decrease fromto the weakening markets and implemented cost-cutting

CHF 570 at 31 March 2011 to CHF 494.50 at 31 March 2012.

measures in summer 2011, which we stepped up in autumn

With the closing of fiscal year 2011/12, all legacy stock option

2011 to adjust our cost base to the actual sales levels. We

plans ended and LEM will not record any additional stock

adjusted capacity by reducing the global headcount from

option plan cost/income going forward.

more than 1’300 to about 1’100 employees. Even during thischallenging period we kept strengthening the company with

Following its qualification as High/New-Technology Enterprisestrategic investments in innovation and in operational excel-

in China, LEM China enjoys reduced income tax rates fromlence. In order to keep up flexibility to face faster changing

2011 to 2013. The ratification of the Swiss-Japanese double

customer requirements we carefully planned our production

taxation agreement resulted in a significant reduction of with-capacities. Restructuring cost amounted to CHF 0.7 million.

holding tax obligations. This together with other one-time

Strict cost control, transfer of production lines to China andeffects reduced the Group tax rate from 21.3% in 2010/11 toadditional measures to raise productivity helped us achieve

12.4% 2011/12.

quarterly savings of more than CHF 1.1 million from Q4 of
2011/12.

Net profit for the year was CHF 28.5 million (-28.1%).

2011/12

Our balance sheet remains solid. Total assets were reduced

In CHF millions

Q1

Q2

Q3

Q4

Total

to CHF 132.5 million mainly due to the reduction of net working capital. Our equity ratio remained high at 60.0% (59.8%).

Orders received
Sales
Book-to-bill
Operational EBIT
EBIT
Net profit

49.6 *
67.7
0.73
11.6
11.5
7.2

30.9 *
57.9
0.53
7.6
8.3
7.8

47.4
55.0
0.86
6.9
7.0
5.7

55.0
55.7
0.99
8.1
7.7
7.8

182.9
236.3
0.77
34.2
34.5
28.5

Industry segment: increased market volatility
Sales in the Industry segment reached CHF 208.3 million.
The decrease of 23.6% compared to 2010/11 is mainly
attribu­t able to a slump in the solar business, customers’
inventory corrections and negative foreign exchange effects.
Operational EBIT decreased by 47.9% to CHF 30.0 million.

* Includes cancellations CHF 10.5 million and CHF 14.0 million in Q1 and Q2
respectively

Europe remained our most important market followed by Asia

At CHF 236.3 million, sales decreased by 20.2%. At constantCompetition has intensified due to new capacities and broad-exchange rates, sales decreased by 12.2%. Reported book-ened product portfolios. Nevertheless we managed to keep

ings declined by 45.7% to CHF 182.9 million. For the full fiscal

and even extend our leading market positions in several appli-

year, the reported book-to-bill ratio was 0.77. In Q4 the book-

cations. In 2011/12, we launched some important new prod-

to-bill ratio came back to 0.99. The decline in bookings wasucts, such as the ITC product family for energy metering in

the result of weak renewable energies markets, particularly

trains and the CTSR product family for leakage control in solar

solar, and the fact that many customers reduced their inven-

panel inverters. The new products were well received by our

tories after having placed major bookings in previous quarters.

customers.

with 52% and 33% of sales respectively.

Reported bookings also contained cancellations of CHF 24.5
million in the solar business. Excluding these cancellations,

The drives & welding business slowed in the first half of thebookings were CHF 207.4 million.

fiscal year due to weak demand and inventory corrections,particularly in Asia and Europe. Sales decreased by 9.6%

The gross margin reached 40.8%, a decrease of 1.8 percent-compared to 2010/11.

age points compared to 2010/11. The foreign exchange
effects, the increased price pressure, the lower absorption of

The renewables & power supplies business proved to be thefixed cost due to lower volumes and an impairment of invest-

most volatile. After an extraordinarily strong 2010/11, we

LEM | Annual Report 2011/12

10

recorded a weakness across all markets. Sales declined by

Our priority for 2012/13 is to participate in more new conven-

45.1%. Customers’ inventories started to normalize in Q4 oftional and green cars platforms thanks to reduced manufac-

2011/12 and subsequently bookings started to recover.

turing cost and smarter products.

The traction business proved to be a mature business in

Strategies to extend our leadership position

2011/12. We partially compensated the delays of major proj-

The major drivers that have supported our business for theects in China with new trackside projects in the UK. Sales

past 40 years remain valid. The constant need for moredecreased by 11.1%.

energy, reliable energy, energy efficiency and mobility is asstrong as ever. We are convinced that these market drivers

Sales in the high precision business decreased. We increased

will continue to support our business going forward.

the market share in the medical market and secured new
projects in the research market in Asia, a market we had not

In order to leverage these drivers we have intensified ourtapped so far. The test and measurement market recorded a

strategic initiatives to increase LEM’s competitive edge:

slight decrease.
_ _ Increase technology leadership
Our priorities for 2012/13 are to increase our market share,

We have established a dedicated multidisciplinary innova-

to streamline our product portfolio and to accelerate our inno-

tions team in Geneva with increased personnel as well as

vation with the launch of a series of new products.

financial resources. Close to 100 people are active in R&D,
of which more than half hold a PhD or a master’s degree in

Automotive segment: successful growth across theengineering. We invest around 5.5% of sales in R&D. Our

businesses

R&D roadmap foresees to significantly increase the number

The Automotive segment continued to grow throughout theof product launches going forward.

year and achieved a record result. Sales grew by 19.1% to
CHF 28.0 million with both the conventional as well as the	We clearly defined our product development priorities: ongreen cars business contributing to this performance. At con-

one side, we improve the performance of our products instant exchange rates sales grew by 34.3%. North America

terms of precision and additional functionalities. On theremains our biggest market with more than 50% of sales, butother side, we reduce the costs of our products in order todue to the strongest growth rates (+37.1%) the Asian markets

help our customers increase their competitiveness. Also

now represent more than a third of sales. The operational

we want to strengthen our position in smart grid and low

EBIT reached CHF 4.2 million, an increase of 48.0% com-

power applications. We also intensify our investment in newpared to 2010/11.

proprietary ASICs for various applications.

The global car industry performed well during 2011/12, par-	In order to better develop and protect our intellectual prop-

ticularly in North America and China. However, we noticed

erty, we have set up a special unit managing LEM’s IP withincreased competition with potential new players offering me-

a dedicated team of experts.

too products. Also, car manufacturers put more emphasis on
double sourcing electronic components. As anticipated, pricepressure has increased. Energy efficiency continued to be	In 2011/12 we have invested CHF 13.0 million (5.5% of sales)in R&D. In total, we launched 7 new products.

the main topic in the automotive industry with an increasing
number of hybrid cars being launched. In these markets we_ _ Increase efficiency

were particularly successful with our green cars and conven-	In order to maintain our margins in a more competitive market

tional cars battery management applications (HAH1 family

environment, we constantly look to improve our productand HABT family), which are used in many platforms. We

costs through low-cost sourcing and manufacturing as wellsigned new contracts in all regions, which will secure growth

as enhanced productivity.

in the coming years. In 2011/12 we increased investment inproduct development and production capacity.

	Aiming at reducing the complexity of our organization, we
have decided to move our high precision competence center

The conventional cars business increased sales with its key

from Copenhagen, Denmark, to Geneva. The move will becustomers and secured new contracts in Asia and North

finalized by summer 2012.

America. The new high precision start/stop application has
proven to be an attractive addition to our product range.

_ _ Increase production flexibility	Over the last years we registered an increased volatility in

We registered a lot of activity in the green cars business andour business. Going forward, we anticipate our businessstarted mass production for many customers. Although someto remain subject to strong cycles which demand a highcustomers have not reached their target, the growth in thislevel of flexibility. To this end we are constantly improving

business was above 50%. The majority of all green cars plat-

our supply chain management by better anticipating ourforms planned or in production today are equipped with LEM

customer demands and closely working with our suppliers.

products.

LEM | Annual Report 2011/12

11

LEM quality remains the industry benchmark

LEM’s culture is based on achievement, innovation and theMaintaining uncompromised product quality is our brandability to drive change in a truly global organization. Rapid

promise, irrespective of market turbulences or place of pro-

expansion of operations in China exemplifies how these com-duction. All our production sites are certified according to themitments are being translated into concrete career advance-

strictest standards requested by our customers in their par-ment and development for local managers and specialists.

ticular industries. To ensure that our products meet the high-We offer similar career opportunities in our worldwide sites.

est customer requirements regarding functionality, safety, andtimely availability, all our processes are regularly reviewed and

The broad diversity of nationalities and cultures across our

improved. As a sign of confidence in the quality of our prod-

Group is a great asset, which not only drives our competitive-

ucts, LEM is the only transducer manufacturer offering a five-ness but also brings us closer to our customers around theyear warranty on all products.

world.

Careful environmental management

Headcount evolution

Environmental management is applied at our three major production sites, which all are ISO 14001-certified. We fully com-

Number of employees at the end of
the financial year

31.3.2012

31.3.2011

1'100
25
11
1'136

1'215
89
12
1'316

ply with the European RoHS (Restriction of Hazardous Substances Directive) and REACH (Registration, Evaluation,
Authorization and Restriction of Chemicals) directives. We
follow ethical rules as well as local working laws and audit all
our suppliers to ensure they also comply with our social andethical standards. LEM has been member of the UN Global
Compact since 2008.

In full-time equivalents (FTEs)

Outlook: remaining vigilant
As the economic climate remains challenging in 2012/13 with

Invest in a motivated workforce
LEM counts on its experienced and loyal workforce. Greatemphasis is put on making sure that managers and employees
are highly motivated and satisfied by the content of their job
and the recognition of their contribution, the job scope being
varied due to LEM’s size, global reach and organization.

LEM | Annual Report 2011/12

Permanent employees
Temporary employees
Apprentices
Total

12

continued uncertainty in our markets, we expect a progressive restart in the Industry segment and further growth in the
Automotive segment. Our ambition is to deliver a result within
our operational EBIT margin target range of 15 to 20%.

Mobile phone base station Radio frequency signals are transmitted from thephone to the nearest base station andincoming signals (carrying the speechfrom the person to whom the phoneuser is listening) are sent from the basestation to the phone at a slightly different frequency. The base stations link
mobile phones to the rest of the mobileand fixed phone network.

1

Below the antenna of a base station is a container housing
the electronic equipment needed to receive and to send thesignals, called the controller. Every base station has a connection to the power grid like every house, however it mustbe transformed down electronically to 48 V DC. This transformation is performed by modern power electronics, and atransducer measures the output current to ensure a stable
power supply and to control the output in case of a failure.
The power supply is critical for the effective function of thebase station. In case of a failure or fault in the grid, the basestation must continue to function. In order to provide backup, power batteries are installed, which supply emergency
power for a temporary period. Transducers are used to control the charge and discharge of these batteries, maintaining
them in good operational condition.

HASS

LTS

4

B

A
2

3

A
B
1
2
3
4

HASS
LTS
Antenna
Battery
Controller
Power supply
LEM | Annual Report 2011/12

13

LEM’s Core Values
LEM’s core values
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 same purpose.
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.

LEM | Annual Report 2011/12

14

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 successdepends on keeping our promises and taking responsibility
for all our actions. Success is measured by the results we
produce in customer 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.

Corporate Governance Report
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 order toenhance the clarity of this chapter, reference is made to otherparts of the Annual Report and our website (www.lem.com).
Key elements are contained in the Articles of Incorporation
revised 1 July 2011.
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 CH0022427626). On
31 March 2012, the market capitalization was CHF 563.7
million.
LEM Group is structured into the Industry segment and theAutomotive segment. Appropriate segment reporting pursuant to IFRS is contained in note 3 of the notes to the consolidated financial statements. All companies in LEM Groupare listed under “scope of consolidation” in note 27 of theconsolidated financial statements, with their respective company names, registered offices, share capitals and the relevant percentages of shares held. There are no other listedcompanies in the scope of consolidation.
Significant shareholders
On 31 March 2012, the following shareholders held 3% ormore of the share capital and voting rights:
Werner O. Weber and Ueli Wampfler,in Zollikon/ Wollerau, Switzerland, through
WEMACO Invest AG and PH Partner Holding
AG, in Zug/Cham, Switzerland
Ruth Wertheimer, in Kfar, Israel, through7-Industries Holding B.V., in Amsterdam,
Netherlands
Sarasin Investmentfonds AG,
in Basel, Switzerland

33.6%

Erwin Studer and Joraem de Chavonay SA, in
Zollikon/Zug, Switzerland

7.9%

Amerprise Financial Inc., in Minneapolis, USA,through Threadneedle Asset Management
Holding Ltd, in London, United Kingdom

5.0%Montanaro Asset Management Ltd, in London,
United Kingdom

4.8%

Impax Asset Management Ltd, in London,
United Kingdom

3.1%

12.7%

8.9%

2 Capital structure
Capital and shares
The nominal value of the share capital of LEM Holding SA
is CHF 570’000, which is divided into 1’140’000 fully paidup 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 61.
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 2012, LEM Holding SA held 4’588 treasury
shares.
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 in the Compensation Report, under
the section 2.1.4 “Discontinued plans” on page 25 and in
the notes to the LEM Holding SA Statutory Accounts on
page 68.
3 The Board of Directors
Election, terms of office and cross-involvement
The Board of Directors was comprised of the following
members as of 31 March 2012 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 1 July 2011, Felix
Bagdasarjanz, Peter Rutishauser, Ilan Cohen, Anton Lauberand Ueli Wampfler were re-elected as members of the Boardof Directors and Andreas Hürlimann was newly elected as
member of the Board of Directors. Felix Bagdasarjanz maintained the Chairmanship and Peter Rutishauser the Vice
Chairmanship. All members of the Board are non-executive
and have at no time been part of the executive managementof LEM. Furthermore, they have no significant business connections with the LEM Group.

Mr. Werner O. Weber and Mr. Ueli Wampfler have notified
the company of the creation of a group of shareholders on
1 June 2011.
Cross-shareholdings
LEM has no cross-shareholding with other joint-stock companies.

LEM | Annual Report 2011/12

15

The Board of Directors was comprised of the following members as of 31 March 2012:
Felix Bagdasarjanz

Position Chairman of the Board of Directors

Nationality Swiss

Entry 2002

Born in 1945

Professional background
Since 2002, Independent business consultant
1999 – 2002, CEO, ESEC and Member of the Executive Board, Unaxis
1997 – 1999, Member of the Executive Board, ABB Switzerland
1992 – 1997, Managing Director, ABB Drives AG/ABB Industrie AG
Other notable activities_ _Member of the Board of Schneeberger Holding AG, Roggwil
Education Dr. of Electrical Engineering, ETH Zürich

Position Member of the Board of Directors, Member of the Audit Committee

Ilan Cohen
Nationality Israeli

Entry 2010

Born in 1956

Professional background
Since 2010, President of Servotronix Motion System Ltd. and Servotronix Motion Control Ltd., Israel
2008 – 2009, General Manager of Kollmorgen Industrial & Commercial Engineered Solutions Ltd.
(part of Danaher Group)
1997 – 2008, President and CEO of Kollmorgen Servotronix Ltd.
1987, Founder of Servotronix Ltd.
1983 – 1990, Associate professor at University of Tel Aviv, Israel
Other notable activities_ _Board member of Servotronix Motion Control Ltd., Israel_ _Founder, Cleantech Incubator and Engineering School, IDC University, Israel
Education
Ph. D. Control System, Ecole Polytechnique de Bruxelles, Belgium
MSEE, CALTECH Pasadena, USA
M. Sc. and BSEE Electro-mechanical engineer, Ecole Polytechnique de Bruxelles, Belgium

Andreas Hürlimann

Position Member of the Board of Directors

Nationality Swiss

Entry 2011

Born in 1964

Professional background
Since 2011, Independent board professional and entrepreneur
2005 – 2010, Managing Director Spencer Stuart, Zürich
1999 – 2005, Global Director of Industry Practices and Member of the Executive Board,
Arthur D. Little Inc., London and Paris
1990 – 1999, International Marketing & Sales Management roles with Siemens Schweiz AG, ABB
Kraftwerke AG and Oerlikon Aerospace Inc., Zürich, Baden, Montreal
Other notable activities_ _None
Education M. Sc. Electrical Engineering, ETH Zürich

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16

Anton Lauber

Position Member of the Board of Directors, Member of the Nomination & Compensation Committee

Nationality Swiss

Entry 2004

Born in 1951

Professional background
Since 2012, Independent board professional
2010 – 2011, Delegate of the Board and President Division Components, Schurter Group, Lucerne
1993 – 2009, CEO and Delegate of the Board of Directors, Schurter AG, Lucerne
1988 – 1992, Technical Director, Schurter AG, Lucerne
1985 – 1988, Managing Director, Generatorenfabrik ABB AG, Baden
1980 – 1984, Head of Production, Power Plants ABB AG, Baden
Other notable activities_ _Vice Chairman of the Board of Directors, Bossard Holding AG, Zug; Voegtlin Meyer AG, Brugg_ _Member of the Board of Directors, CTC Analytics AG, Zwingen; Landert Motoren AG, Bülach;
Fr. Sauter AG, Basel_ _President of the Council, Hochschule Lucerne / University of Applied Sciences and Arts
Education
Graduated Machinery Engineer, Technical University Brugg-WindischPostgraduate diplomas at University of Applied Sciences, Lucerne, andUniversity of St. Gallen in Business Administration

Peter Rutishauser

Position Vice President of the Board of Directors, Chairman of the Nomination & Compensation Committee

Nationality Swiss

Entry 2003

Born in 1956

Professional background
Since 1989, Independent entrepreneur, member of the board and­s hareholder of several mid-sized companies
Other notable activities_ _Delegate of the Board of Directors, Equatis AG, Zürich
_ _Member of the Board of Directors, Pavatex AG, Fribourg
Education Dr. sc. nat., ETH / Lic. oec., HSG

Ueli Wampfler

Position Member of the Board of Directors, Chairman of the Audit Committee

Nationality Swiss

Entry 2007

Born in 1950

Professional background
Since 2004, Founder and Senior Partner, Wampfler & Partner AG, Zürich
1998 – 2004, Director, STG Schweizerische Treuhandgesellschaft, Zürich
1974 – 1998, STG Coopers & Lybrand, Zürich (Partner since 1991)
Other notable activities_ _Chairman of the Board of Directors, Swisa Holding AG, Cham; F. Aeschbach AG, Zürich;
Mercedes-Benz Automobil AG, Schlieren; Merbag Immobilien AG, Schlieren_ _Member of the Board of Directors, Caspar Finanz AG, Zug (Traco Power Group) Lupfig;
Rebew AG, Zürich
Education Lic. oec., University of Zürich / Certified auditor

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, three full-day meetings and six half-day
meetings were held. Additionally, one ad hoc conference calltook place during the year. The meetings usually take placeat 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 without 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 present, 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 outside Secretary of the Board and distributed to the members 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 feedback sessions at the end of ameeting provide valuable inputs for the continuous improvement of the Board’s coherence and leadership.

LEM | Annual Report 2011/12

17

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 decisions 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 and purchase/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, including
co-worker satisfaction and management development
and legal, intellectual property, social and environmental
aspects.

are revalued a second time, taking into consideration theaction plans. In step four the action plan is validated andthereafter monitored on a monthly basis (step five).

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 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 theBoard.
_ _ The Committees meet at regular intervals and exchangedetailed information with the Management.
_ _ 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.

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.

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 listof 10 to 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 planis put in place to reduce the risks. The hazards thereafter

LEM | Annual Report 2011/12

18

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.

Committees
Two standing committees support the Board of Directors.
They are comprised of two non-executive members of theBoard of Directors. They meet whenever necessary but atleast 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 supervision of the external auditor, assessment of the effectiveness, compliance and clarity of the Group financial reporting and the assessment and preparation of the financial
reports to the shareholders. Furthermore, it reviews critical accounting policies, financial control mechanisms andcompliance with corresponding laws and regulations aswell as the development and continuous improvement of
the internal control system. If required, the external Groupauditors are invited to participate at the meeting. The ACprepares proposals to be decided by the Board of Directors. In the completed financial year three half-day meetings were held.
_ _ The Nomination & 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 financial year four half-day meetings were held.

4 Senior Management
The Senior Management was comprised of the following members as of 31 March 2012:
François Gabella

Function CEO LEM Group

Nationality Swiss

With LEM since 2010

Born in 1958

Previous companies and positions_ _2006 – 2010, CEO, Tesa SA_ _2002 – 2006, SVP, Areva_ _1996 – 2002, Business Area Manager, ABB Power Transformers
Education M. Sc. Microtechnics EPFL, MBA IMD

Julius Renk

Function CFO

Nationality German

With LEM since 2009

Born in 1970

Previous companies and positions_ _2006 – 2009, CFO, AB Enzymes GmbH
_ _2000 – 2006, CFO, IP France SA (RTL Group)
Education Lic. oec. HSG, CEMS Master in International Management

Luc Colombel

Function Vice President, Automotive

Nationality FrenchWith LEM since 1996

Born in 1959

Previous functions_ _2005 – 2009, Vice President, Automotive and Traction_ _2004 – 2005, Vice President, Traction_ _1996 – 2004, Business Development Manager Auto
Previous companies and positions_ _1988 – 1996, Strategic Development and Sales Manager, Arcelor Group
Education Engineer ESILEC

Hans-Dieter Huber

Function Vice President, Industry

Nationality German

With LEM since 1995

Born in 1959

Previous functions_ _2000 – 2004, Business Development manager_ _1995 – 2000, Sales & Marketing Manager Industry LEM Germany
Previous companies and positions_ _1986 – 1995, R&D Team Manager, ABB Drives Germany
Education Graduate Electrical Engineer, Berufsakademie Mannheim

Jean-Marc Peccoux

Function Vice President, R&D

Nationality FrenchWith LEM since 2001

Born in 1966

Previous functions_ _2004 – 2010, Corporate Quality Manager LEM Group_ _2003 – 2004, Quality Manager & Purchasing Manager Geneva site
_ _2001 – 2003, Quality Manager Geneva site
Previous companies and positions_ _1995 – 2001, Quality Director & R&D Program Manager Valeo_ _1991 – 1995, R&D Project manager, Schlumberger_ _1990 – 1991, Software Engineer, BEL Group
Education M. Sc. ENSAM, Master of Economics, Besançon University

Simon Siggen

Function Vice President, Operations

Nationality Swiss

With LEM since 2002

Born in 1967

Previous functions
2002 – 2005, Operations Manager Geneva site
Previous companies and positions_ _Business Segment Director, Leclanché
Education Engineer EPFL, Master in Logistics, EPFL

LEM | Annual Report 2011/12

19

None of the members of the Senior Management have otheractivities in governing or supervisory bodies, any official functions or political posts nor any permanent management functions for important Swiss and foreign interest groups.

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.

Management contracts
There are no management contracts with companies or individuals outside the LEM Group.

7 Change of control and defensive measures
Opting-out clause

5 Compensation and shareholdings
Please refer to the section “Compensation Report” following on page 22.
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 the rightto attend and vote at the shareholders’ meeting.
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 and submit matters to be placed on the agenda.

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. The Swiss Takeover
Board has decided on 22 September 2011 that a passingof the 33 1⁄ 3% threshold by the shareholder group Weber &Wampfler would not trigger the obligation for a public takeover offer.
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, one member of the Senior Management will receive additional severance payments equal
to 6 months remuneration.
8 Auditors
The duration of the auditors’ mandate is one year. The current
auditors’ mandate was first decided at the 2005 Annual General Meeting of shareholders for the audit of the financial year
2005/06. Hans Isler was the responsible partner since 2005
and has handed over this responsibility to Philippe Stöckli in
2011.
Ernst & Young charged the following fees for professional
services rendered for the twelve-months period ending
31 March 2012:
Type of service
In CHF thousands

2011/12

Audit services
Tax services
Other services
Total

285
636
98
1'019

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.
The auditors report on the results of their audits both orally
and in writing. Financial statements as well as management
letters are discussed in the Audit Committee in the presenceof the external auditors.
During 2011/12 Ernst & Young attended two regular Audit
Committee meetings.

LEM | Annual Report 2011/12

20

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
or send an e-mail to investor@lem.com(phone: +41 22 706 12 50).

LEM | Annual Report 2011/12

21

Compensation Report
The future of LEM depends on our ability to attract, retain and develop talented people. Among themany measures we use to achieve this ambition are competitive remuneration policies for our Senior
Management. Our compensation policies are based on performance and LEM’s emphasis on creating value for its shareholders. To this end, our compensation policies are designed to be aligned withshareholders’ interest.
At last year’s Annual General Meeting (AGM), for the first time, we asked you, our shareholders, toexpress your view on LEM’s compensation policies through an advisory vote. At our forthcoming
AGM on 28 June 2012, we will enable you again to cast an advisory vote on the compensation of theBoard of Directors and the Senior Management. We value your opinion. Even though it remains anadvisory vote, your opinion will seriously be taken into consideration for the future development ofour compensation system.
In brief:_ Core principles
LEM’s compensation policies are based on performance and the creation of long-term value forshareholders. The compensation policies are approved by the Board of Directors on recommendations by the Nomination & Compensation Committee and reviewed on an annual basis. All fixedand variable salaries are paid in cash.
_ Compensation of the Board of Directors
The compensation of the Board of Directors consists purely of a fixed fee paid in cash. There is no
additional variable compensation. The total compensation for the Chairman and the members of
the Board of Directors depends on the amount of responsibility and all work related to the Boardof Director membership such as Committee activity.
_ Compensation of the Senior Management
In order to encourage and reward results that contribute to the sustainable long-term success of
LEM the total compensation of the Senior Management consists of three elements: base salary,bonus according to LEM incentive system (LIS) and nonwage compensation. The target setting
process for the LIS is carried out on an annual basis and includes performance criteria related tothe individual’s function and responsibility and performance criteria related to financial results of
LEM.
_ Changes to the compensation policies
In 2011/12 there were no material changes to the compensation policies.

Felix Bagdasarjanz
Chairman of the Board of Directors

LEM | Annual Report 2011/12

22Peter Rutishauser
Chairman Nomination &Compensation Committee1 Board of Directors
1.1 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 is neither an additional variable compensation nor any participation in an equity-based compensation plan. Each memberof the Board of Directors shall be a shareholder of LEM. The
number of shares to be acquired on the market within aperiod of three years after joining the board shall reach avalue of approximately three annual fixed compensations.
Trading with 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 theparticipation of non-executive directors in any equity-based
compensation plan. SOP 5 has expired on 31 March 2011
and SOP 6 has expired on 31 March 2012.
1.2 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.
The Board of Directors decided to contribute the equivalentof 5% of its annual remuneration to LEM’s cost savings
efforts in 2011/12. The annual salary has been loweredaccordingly.
In 2011/12, an additional fee of CHF 10 thousand each
was awarded to Ilan Cohen and to Andreas Hürlimann for
additional efforts in the role and duties as members of theBoard of Directors.
Compensation of former members
In financial year 2011/12, no compensation was paid to former
members of the Board of Directors.

2011/12
In CHF thousands

Felix Bagdasarjanz 1
Ilan Cohen 2
Andreas Hürlimann
Anton Lauber 3Peter Rutishauser 4, 5
Ueli Wampfler 6
Total

Annual salary

Additional fees

Cash-out for options
granted in prior years

171
95
76
95
143
104
685

–
10
10
–
–
–
20

–
–
–
–
–
–
–

Annual salary

Additional fees

Cash-out for options
granted in prior years

200
80
110
150
100
640

–

2010/11
In CHF thousands

Felix Bagdasarjanz 1, 3
Ilan Cohen
Anton Lauber 5Peter Rutishauser 4, 6
Ueli Wampfler 2
Total

–
–
–
–

Chairman of the Board of Directors
Member of the Audit Committee
Member of the Nomination & Compensation Committee
4
Vice Chairman of the Board of Directors
5
Chairman of the Nomination & Compensation Committee
6
Chairman of the Audit Committee
1
2
3

LEM | Annual Report 2011/12

23

108
–
103
276
–
487

1.3 Shareholdings of non-executive directors
31.3.2012

31.3.2011

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Board of Directors
Felix Bagdasarjanz

1'736

0

1'736

0

Ilan Cohen
Andreas Hürlimann
Anton LauberPeter Rutishauser
Ueli Wampfler
Total

120
211
1'000
2'606
25'00030'673

0
0
0
0
0
0

0
N/A
1'000
2'606
23'00028'342

0
0
0
0
0
0

In number of shares / options

2 Senior Management
2.1 General principles for compensation of Senior
Management
Remunerations for the Senior Management are approvedby the Board of Directors based on recommendations by
the CEO and the Nomination & 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 annual compensation is part of the manager’s contractand does not contain any discretionary elements.
The total compensation for the Senior Management consistsof three elements:
1. Base salary
2. Bonus according to the LEM Incentive System (LIS)	LIS part 1: performance related to the individual’s function and responsibility
	LIS part 2: performance related to the financial performance of LEM
3. Nonwage compensation
2.1.1 Base salary of Senior Management
LEM’s base salary orients itself around a midpoint 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 midpoint 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 them with the benchmark data. The
benchmark data is taken from Mercer Compensation database.

LEM | Annual Report 2011/12

24

2.1.2 Bonus of Senior Management:
LEM Incentive System
The target setting process for the LEM Incentive System(LIS) is part of the LEM performance management and is
carried out on an annual basis. All bonus payments are
made in cash and in the first quarter of the new businessyear based on the annual accounts and the personal performance review. Objectives and performance evaluation
are prepared by the Chairman of the Board of Directors for
the CEO, by the Audit Committee (AC) for the CFO and by
the NCC for other Senior Management. The final approvalis given by the Board of Directors.
LIS part 1: performance related to the individual’sfunction and responsibility
Annual LIS 1 objectives are agreed between the Senior Manager and the CEO at the beginning of each business year
and a final review is performed at the end of the year.
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.
The number of objectives has to be large enough to allow
the manager to reach a fair level of bonus rewarding his
results even under changed business conditions. Since thedegree of achievement of set objectives has to be evaluatedat the end of the period, a clear understanding of the metric
to be applied has to be established at the time of target setting and kept constant for 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 Senior Management
at the beginning of each business year.

LIS part 2: performance related to financial­p erformance of LEM group
The LIS part 2 is an annual bonus which is based on theperformance 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 performanceat the end of year three. Once the forward-looking EVA
objective is defined, the EVA objective remains unchanged
over the period of three years. Every year, the new three
years objective for the cumulated EVA is defined and kept
unchanged over the respective three years period. The
bonus payment takes place every year based on the comparison between the EVA objective defined three years
before and the performance achieved at the end of the three
years 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 the context of the his-

torical performance, the actual three-year financial plan of
LEM and the shareholders’ expectations expressed in theshare 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.
2.1.3 Nonwage compensation of Senior Management
Nonwage compensation includes in particular pension plans(retirement benefits). LEM has a policy to limit nonwage
compensation to what may be required for the job holder
as a work instrument to fulfill his/her function according to
generally accepted local usages.
Senior Management benefits from the Swiss pension plan, adefined contribution plan that provides retirement benefits
and risk insurance for death and disability. Under IFRS, thisplan 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 is funded by contributions fromthe company and the insured employees. The average contribution for the employee is 43% and 57% for the company.

2.1.4 Discontinued plans

2011/12

SOP 6

2010/11

SOP 5
SOP 6

Number ofoptions
NumberNumber­o utstanding of options of options
Grant Date
1.4.2011
issued cancelled

Number of
Number ofoptions
options ­o utstanding­e xercised
31.3.2012

1.4.2007
Total(4'952)(4'952)

4'952
4'952

0
0

0
0

Number ofoptions
NumberNumber­o utstanding of options of options
Grant Date
1.4.2010
issued cancelled

1.4.2006
1.4.2007
Total

17'35023'44440'794000

00

Number of
Number ofoptions
options ­o utstanding­e xercised
31.3.2011

0 (17'350)
0 (18'492)
0 (35'842)

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.
The plan gave the right to cash the counter value of one
share at the predetermined exercise price, which corresponded to the average share price of the fourth quarter
2006/07.
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 2006/07.
The vesting period was three years. The details of the contractual terms of the option plan can be seen in the table
above.

0
4'952
4'952

Exercise
pricein CHF

Fair value
at grant
in CHF240.52

64.92

Exercise
pricein CHF

Fair value
at grant
in CHF139.80240.52

47.69
64.92

Fair value
31.3.2012
in CHF

Exerciseperiod from

Exerciseperiod until

N/A 1.4.2010 31.3.2012

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

During the financial year 2011/12, all remaining 4’952
options were exercised. The average share price for the
exercised options was CHF 499.66.
Termination of option-based compensation plans
During May 2009, the Board of Directors decided not to issue
further equity-based compensation plans. The company
administrated the legacy programs until the expiry of the lastshare option plan (SOP 6) in March 2012 and the settlementof the Performance Share Plan (PSP) in the first quarter of
2011/12. CEO François Gabella and CFO Julius Renk did notparticipate in the stock option program and in the PSP.
In July 2010, the Board has made an 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 thisoffer, 1’385 shares were sold to employees at market valueless CHF 15 discount per share with an average price of
CHF 326.73.
LEM | Annual Report 2011/12

25

2.2 Remuneration of Senior Management
2011/12

In CHF thousands

François Gabella, CEO
Senior Management(excl. CEO)
Total compensation to
Senior Management

Annual­s alary
compen­sationAnnualbonus
compen­sation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

Total compensation

Cash-out
for options
granted inprior years

Pay-out of
PSP shares
granted inprior years

Severance
payment

459
1'154

428
607

46
103

0
0

0
0

933
1'864

0
730

0
1'904

1'613

1'035

149

0

0

2'797

730

1'904

Annual­s alary
compen­sationAnnualbonus
compen­sation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

Severance
payment

Total compensation

Cash-out
for options
granted inprior years

Pay-out of
PSP shares
granted inprior years

338

318

34

0

0

690

N/A

N/A

1'135

647

126

295

148

2'351

5'168

600

1'473

965

160

295

148

3'041

5'168

600

2010/11

In CHF thousands

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

Senior Management decided to contribute the equivalentof 10% of its monthly remuneration for the duration of shortwork in LEM’s main sites, i.e. January to February 2012, toLEM’s cost-savings efforts in 2011/12. The annual salary
has been lowered accordingly.

1 

The annual bonus compensation is shown with the accrual for the performance of the corresponding year, to be paid out in the ­f ollowing year. Allother elements are shown as paid out.

Compensation of former members
In financial year 2011/12, no compensation was paid to former
members of the Senior Management.
2.3 Shareholdings of Senior Management
Senior Management

31.3.2012

In number of shares/options

Number ofshares held

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

300
45
2'100
1'425
1'500
1'450
6'820

0
0
0
0
0
0
0

0
0
0
0
0
0
0

François Gabella, CEO
Julius Renk, CFO
Luc Colombel, Vice President, Automotive
Hans-Dieter Huber, Vice-President Industry
Jean-Marc Peccoux, Vice President, R&D
Simon Siggen, Vice President, Operations
Total

LEM | Annual Report 2011/12

26

31.3.2011

Number ofshares held

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

300
50
1'350
796
764
850
4'110

0
0
1'500
500
938
0
2'938

0
0
600
600
380
500
2'080

Robots A robot is an electromechanical machine that is guided by computerand electronic programming. Robots
can be autonomous, semi-autonomousor remotely controlled. Robots range
from humanoids such as ASIMO andTOPIO to nanorobots and industrial
robots.
Industrial robots usually require movements in 3-6 axes inorder to move the end of the arm in every position. Typicalapplications of robots include welding, painting, assembly,
pick-and-place (such as packaging, palletizing and SMT),
product inspection, and testing; all accomplished with highendurance, speed, and precision.
The robot arm is moved by electrical motors: usually one
motor for each axis. The motors are controlled by a power
inverter that receives its signal from a motion control unit. In
order to control the arm, the power inverter drives the motor
from one position to the next and stops precisely in position.
To do so, an accurate measurement of the current is needed.
Transducers are used to measure the current and, together
with the position sensor, they are responsible for controllingthe fast movement and the precision to stop the arm in the
new position. The motion control unit also contains thememory used to store all the positions required for this work.

CASR

1

2
A
3

A
1
2
3

CASR
Control Unit
Inverter
Motor
LEM | Annual Report 2011/12

27

Financial Review
Sales
LEM’s sales decreased by 20.2% to CHF 236.3 million in
2011/12. There was an unfavorable foreign currency impactof 9.1% in 2011/12. At constant exchange rates the sales
decrease would have been 12.2%. The currency impact
stems from the appreciation of the CHF against the leading
trading currencies, i.e. EUR, USD and CNY.
Gross margin
The gross margin decreased by 1.8 percentage points to
40.8%. The main reasons for this development are the unfavorable foreign currency impact and an impairment chargeof CHF 2.1 million on production lines.

Operating expenses
The operating expenses (including R&D) of CHF 62.3 million
decreased by 5.4% compared to the previous year, mainly
driven by cost savings measures. However, as a percentage
of sales, the ratio increased from 22.2% to 26.4%.
The R&D expenses decreased by 7.5% in 2011/12 to CHF
13.0 million (prior year CHF 14.0 million). R&D cost as apercentage of sales increased from 4.7% last year to 5.5%
for the current fiscal year, which is in line with LEM’s historic
average.
LEM’s share price decreased from CHF 570 on 31.3.2011 to
CHF 494.5 on 31.3.2012, which generated additional SOP
income below operational EBIT of CHF 0.3 million (additional
SOP costs of CHF 5.4 million in 2010/11). Per 31.3.2012, allstock option plans and share plans are closed.

April to March
In CHF thousands

2011/122010/11

Sales
Cost of goods sold
Gross margin236'334(139'848)
96'486296'203(169'904)
126'299

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

(21'864)(27'689)(12'974)(84)
296
34'171(23'406)(28'842)(14'031)(319)
712
60'413315(5'426)EBIT

34'48654'987

Financial expense
Financial income
Foreign exchange effect

(359)
101
(1'704)(475)
116(4'263)

Profit before taxes

32'52450'365

Income taxes(4'037)(10'722)

Net profit of the period

28'48739'64328'487

39'59251
39'643

Additional SOP costs/income

Attributable to:
LEM shareholders
Non-controlling interests
Net profit

LEM | Annual Report 2011/12

28'48728

Net sales

Gross margin

300

130

275

120

250

110

In CHF millions

In CHF millions

50%% of sales

47%

100

225

80

175

44%

70

150

60

125

41%

50

100

40

75

20

25

10

38%

35%

0

0
07/08

08/09

09/10

10/11

11/12

07/08

R&D expenses

08/09

09/10

10/11

9%

65

% of sales

35%

30%

25%

40

15%

20

07/08

08/09

09/10

10/11

In CHF millions% of sales

20%
18%

35
30
25
20

10
5
0
09/10

10/11

11/12

60

30%

50

25%

40
20%

30
15%

20
10%

10

09/10

10/11

0

11/12

5%
07/08

08/09

09/10

10/11

Equity and equity ratio

40

100

30
25

12%

20

10

6%

5

4%

0

% of assets

80%

90

70%

80

60%

70

50%

60

40%

50
40

15

8%

11/12

In CHF millions

35

14%

11/12

% of sales

Net financial assets

16%

10%

15

08/09

08/09

In CHF millions

40

07/08

5%
07/08

Net earnings

45

0

11/12

10/11

5

5
0%

09/10

15
10%

10

0

08/09

25

25
15

3

15%

0

35
20%

30
3%

20%

10

45

45
35

6

25%

55

50
6%

30

In CHF millions

55

9

30%

40

EBIT

60
12

35%

07/08

In CHF millions% of sales

60

11/12

Operational EBIT

In CHF millions

40%

20

30

50

% of sales

70

50

90

200

15

Operating expenses (incl. R&D exp.)

In CHF millions

30%

30

20%

20

10%

10

0%

0
07/08

08/09

09/10

10/11

11/12

07/08

08/09

LEM | Annual Report 2011/12

29

09/10

10/11

11/12

Operational EBIT and EBIT
The operational EBIT (before additional SOP costs/income)decreased by 43.4% to CHF 34.2 million (prior year CHF
60.4 million). The 14.5% operating margin (prior year 20.4%)
is slightly below our target range of 15 to 20%.
Taking into account the additional SOP costs/income in2010/11 and 2011/12, the EBIT is 37.3% lower than last year
at CHF 34.5 million against CHF 55.0 million in 2010/11.
Financial expenses
The net financial expenses decreased from CHF 4.6 million
to CHF 2.0 million in 2011/12 mainly driven by a lower foreign exchange effect.
Taxes
The tax rate decreased by 8.9 percentage points, from
21.3% to 12.4% in 2011/12. The expected tax rate decreasedby 3.0 percentage points, mainly driven by the qualificationof our Chinese subsidiary as High and New Technologies
Enterprise. One-off items provided an additional 5.4% percentage points saving to the tax rate, of which the major
impact is linked to the new free trade agreement between
Switzerland and Japan, which has removed the withholding
tax on dividend payments from our Japanese subsidiary.

LEM | Annual Report 2011/12

30

Net profit for the year
Net profit for the year is 28.1% lower than last year, at CHF
28.5 million.
Balance sheet
LEM reduced its net working capital (current assets – current
liabilities – net cash) to 12.3% of sales, versus 13.3% lastyear.
The net financial assets (cash – financial liabilities) decreased
from CHF 26.6 million to 18.1 million. On 31 March 2012,
LEM had CHF 3 million interest bearing financial liabilities.
The balance sheet remains healthy with an equity ratio of
60.0% (prior year 59.8%).
Cash flow
The cash flow before changes in net working capital reached
CHF 35.4 million in 2011/12. CHF 11.2 million have been
generated by the net working capital decrease due to thelower activity. Free cash flow is at CHF 37.5 million, an
increase of CHF 16.8 million compared to last year.

LEM Group
Consolidated Statement of Financial Position
Consolidated Income Statement. . . . . . . 33

. . . . . . . . . . . . . . . . . . . . . 34

Consolidated Statement of Comprehensive Income . 35
Consolidated Statement of Changes in Equity . . . . . . . 35
Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . 36
Notes to the Consolidated Financial Statements

....

37

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

LEM | Annual Report 2011/12

31

LEM | Annual Report 2011/12

32

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

Notes

31.3.2012

31.3.2011

7
4
5

21'12142'14026'605
2'009
2'956
94'831

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

3'485
24'173
6'657
3'368
37'683

1'919
25'6127'796
2'181
37'508132'514161'979

Notes

31.3.2012

31.3.201111

17'86314'855
8'244
3'043
3'000
632
47'63729'617
16'295
7'560
1'556
618
2'821
58'467

457
4'217
642
5'316

969
5'541
89
6'599

52'95365'066570(1'984)
11'42569'55079'561575(7'091)
17'91485'51596'91379'561

96'913132'514161'9796198
910, 23

Total assets

Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses
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

12
7
13

12
19
13

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

14
14
14

LEM | Annual Report 2011/12

33

Consolidated Income Statement
April to March
In CHF thousands

Sales
Cost of goods sold
Gross margin

Notes

2011/122010/1115

236'334(139'848)
96'486296'203(169'904)
126'299

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

15
15
15

(21'831)(27'428)(12'953)(84)
296
34'486(23'966)(33'334)(14'405)(319)
712
54'987

Financial expense
Financial income
Exchange effect

16
17
18

(359)
101
(1'704)(475)
116(4'263)32'52450'365(4'037)(10'722)

28'48739'64328'48728'487

39'59251
39'643

25.11
25.11

34.69
34.51

Profit before taxes
Income taxes

19

Net profit for the year
Attributable to:
LEM shareholders
Non-controlling interests
Net profit for the year
The results of both years are derived from continuing operations.
Earnings per share, in CHF
Basic earnings per share
Diluted earnings per share

20
20

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

LEM | Annual Report 2011/12

34

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

2011/122010/11

Net profit for the period recognized in the income statement

28'48739'643174(4'158)(7)

28'66128'66135'47835'42751

Currency translation difference
Unrealized (loss)/gain on derivatives designated as cash flow hedges
Total comprehensive income for the period
Attributable to shareholders
Attributable to non-controlling interests

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

In CHF thousands

1 April 2010
Net profit of the yearShare­c apital

Capitalreserve

Reservefor­t reasury
shares575

15'647

3'387

Movement in derivative­instruments on treasury shares
31 March 2011
1 April 2011
Net profit of the year
Other comprehensive
income/loss
Total comprehensive income
Changes in capital
Dividends paid
Performance Share Plan
Movement in treasury shares
31 March 2012

Share
plan

Translation
reserve

Retainedearnings(3'387)

925

1'482

64'536
39'592(7)

214
51

39'585(22'895)

51(4'158)Other comprehensive
income/loss
Total comprehensive income
Dividends paid
Dividends paid to­n on-controlling interests
Changes in
non-controlling interests
Performance Share Plan
Movement in treasury shares

Non-­controllinginterests

Treasuryshares(4'158)18

Totalequity83'37939'643(4'165)35'478(22'895)
(50)
(50)
(215)

631

(197)
631
(5'456)
6'023(5'456)
1'752

5'456
(1'752)(5'456)
1'752

575

11'943

7'091(7'091)

1'556(2'676)85'515

0

96'913575

11'943

7'091(7'091)

1'556(2'676)85'51528'487

0

96'91328'487
174

4'271

174
174

(5)

(3'968)

3'968

570

(1'681)
542
1'984

1'681
(542)
(1'984)

11'943(1'556)0

28'4875(45'461)
1'465
(461)
(2'502) 69'550

28'661
0(45'461)(91)(461)
0 79'561

The 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 2011/12

35

Consolidated Cash Flow Statement
April to March
In CHF thousands

2011/122010/11

Cash flow from operating activities
Profit before taxes
Adjustment for non-cash items_ _ Net financial result_ _ Derivative financial instruments revaluation_ _ Fair value charges for share-based payments_ _ Depreciation and amortization_ _ Impairment loss
_ _ Gain / loss on disposal of fixed assets_ _ Increase (+) / decrease (-) of provisions_ _ Movement in pension
Interest received
Interest paid
Taxes paid
Payment for cash-settlement of SOP and PSP
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

32'52450'365

147
(198)
231
8'026
2'110
866
1'422
(762)
101
(248)
(6'870)(1'933)35'416
8'649
16'358(13'769)
11'23846'654

107
0
6'052
7'403
660
0
3'398
(515)
116
(223)
(6'442)(9'423)51'498(16'600)(18'371)
13'519(21'452)
30'046

Cash flow from investing activities
Investment in fixed assets
Disposal of fixed assets and intangible assets
Investment in intangible assets
Increase (-) / decrease (+) in other assets
Cash flow from investing activities(8'419)
0
(550)
(151)
(9'120)(9'147)109(345)
0(9'383)

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

0
(461)
0
(45'461)00(45'922)(197)(5'768)
5'715(22'895)(50)(14)(23'209)

Change in cash and cash equivalents(8'388)(2'546)

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

26'613(104)
18'12129'756(597)
26'613

LEM | Annual Report 2011/12

36

Notes to the Consolidated
Financial Statements
1 General information
LEM Group (the Group) is a market leader in providing innovative and high quality solutions for measuring electricalparameters. Its core products – current and voltage transducers – are used in a broad range of applications in drives
and welding, renewable energies and power supplies, traction, high precision, conventional and green cars businesses. The Group has operations in eleven countries andemploys around 1’100 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 15 May 2012.

Standard or­i nterpretation

IAS 24IFRIC 14IFRIC 19
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 Financial
and Reporting Standards (IFRS) and interpretations published by the International Accounting Standards Board(IASB) and comply 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 2011/12, LEM Group introduced the following revised
standards and interpretations:

Title

Effective date

ImpactRelated party disclosures
Prepayments of a minimum funding
requirement – Amendments
Extinguishing liabilities with equity instruments
Annual improvement project1 January 2011
1 January 2011

None
None

1 July 2010
1 July 2011
unless otherwise
stipulated

None
None

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

Title

Effective date

IAS 12
IAS 19IAS 27
IAS 28IFRS 1

Deferred tax, recovery of underlying assets – Amendments
Employee benefits – Revised
Separate financial statements – Revised
Investments in associates and joint ventures – Revised
Severe hyperinflation and removal of fixed dates tofirst-time adopters

1 January 2012
1 January 2013
1 January 2013
1 January 2013
1 July 2011

IFRS 7IFRS 9IFRS 10IFRS 11IFRS 12IFRS 13IFRIC 20IAS 1

Transfers of financial assets – Amendments
Financial instruments – Classification and Measurement
Consolidated financial statements
Joint arrangements
Disclosure of interests in other entities
Fair value measurements
Stripping costs in the production phase of a surface mine
Presentation of items of other comprehensive
income – Amendments

1 July 2011
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 July 2012

IAS 32

Offsetting financial assets and financial
liabilities – Amendments

1 January 2014

IFRS 7

Disclosures – Offsetting financial assets and financial
liabilities – Amendments

1 January 2013

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, f­ inancial position, income
or cash flow situation of LEM except IAS 19 – Revised as explained below.

LEM | Annual Report 2011/12

37

The amendments that are expected to have the most signi­
ficant impact include:_ _ Abandonment of the corridor method; the unrecognizedactuarial losses would be registered in the financial statements. As a consequence, an equity adjustment would
be booked against the non-current pension asset and apension liability would be shown. As per the existing IAS
19 evaluation, this would create a negative impact of CHF
5’771 thousand on the Group equity.
_ _ Replacement of the expected return on plan assets andinterests costs on the defined benefit obligation with asingle net interest component which is calculated byapplying the discount rate to the net defined benefits asset
or liability. Also, past-service costs that will be recognizedin the period of a plan amendment and unvested benefits
that will no longer be spread over a future period until thebenefits become vested. These changes will affect the
profit for the period and the earnings per share by increasing employee benefit costs of the Group. It will also impact
the amounts presented in other comprehensive income,and the net employee benefits liabilities/(assets) in thebalance sheet. The impact of these latter changes on the
profit or loss and on the other comprehensive income has
not yet been conclusively determined.
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 equipment
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. Other
intangible 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.

LEM | Annual Report 2011/12

38

Income and other taxes
LEM Group is subject to income taxes in numerous juris­
dictions. 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 made inorder 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 discount rates. Substantial changes in the assumed development of any of thesevariables 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 is normallythe case when it owns more than one half of the voting 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 dateof transfer of control. The costs of purchasing a company are
determined as the sum of the fair value of the assets that are
to be paid to the seller and the obligations that are enteredinto, or acquired, on the date of purchase. Identifiableacquired assets, liabilities and contingent liabilities are­recognized at their fair value as of the date of their acquisition.
The Group’s share of the purchase price that exceeds the fairvalue of the identifiable net assets is recognized as goodwill.
The Group’s share of the fair value of the identifiable net
assets that exceeds the purchase price is shown as gain on
bargain purchase on the income statement.
Intra-group assets and liabilities as well as income andexpenses are set off against each other.
Also intra-group intermediate profits on inventories andfixed 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 2012 and
31 March 2011.
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 is thecurrency of the primary economic environment in which they
operate.
Foreign currency translation
All assets and liabilities in the balance sheets of subsidiaries
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 cumulative translationdifferences recognized in shareholders’ equity are transferredto the income statement.
The following table summarizes the principal exchange rates
that have been used in the translation process.
Currency

Incomestatementof 2011/12
Average rate
in CHF

Incomestatementof 2010/11
Average rate
in CHF

Balancesheet
31.3.2012
Year-end
rate in CHF

Balancesheet
31.3.2011
Year-end
rate in CHF

EUR
GBP
JPY
USD
RUB
CNY
DKK

1.214
1.407
0.0112
0.882
0.030
0.138
0.163

1.340
1.575
0.0118
1.014
0.034
0.151
0.180

1.204
1.444
0.0109
0.902
0.031
0.142
0.162

1.299
1.474
0.0111
0.917
0.032
0.140
0.174

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 non-monetary assets are translated at historical rates.
Gains and losses arising from the transactions as well as fromthe translation of monetary assets and liabilities in foreign
currencies are recorded as income or expenses in theincome statement (except from translation differences arisingfrom a monetary item that forms part of the Group’s net
investment in a foreign operation, which are included inshareholders’ 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 and bank loans with a maturity of less than 3months.
2.7 Inventories
Inventories are stated at the lower of cost or net realizablevalue. The first-in, first-out (FIFO) method is applied. The
cost of finished goods and work in process comprise raw
materials, direct labor costs and other costs that can bedirectly 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 equipmentnil
20 –40 years
5–8 years
2–5 years
3–5 years
3–5 years

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 associatedwith 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.

LEM | Annual Report 2011/12

39

Research and development
Research costs are written off as incurred. Development
costs are capitalized as intangible assets only if it is probablethat 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 and­i ntangible 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.
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 re-evaluated at thelower of fair value less cost to sell or the carrying amounts
at the date 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.

LEM | Annual Report 2011/12

40

2.12 Financial assets
Financial assets can comprise cash, receivables, accrued
income, marketable securities and derivative financial
instruments.
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 arerecognized under other non-current assets or other noncurrent financial liabilities.
For a derivative financial instrument to be recognized as aqualified hedging transaction, certain requirements regarding
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.
The Group uses derivative financial instruments to hedge
foreign exchange risks of forecasted transactions. Derivative
financial instruments can comprise of forward exchange
contracts and option based structures.
2.14 Financial liabilities
Financial liabilities comprise bank overdrafts, bank loans,payables, accrued expenses and derivative financial instruments 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.

2.15 Leases
Assets acquired under non-current finance leases are capitalized 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.
2.16 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.
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 administrated the legacy programs until the

expiry of the last stock option plan (SOP 6) in March 2012
and the settlement of the PSP in the first quarter 2011/12.
As per 31 March 2012, all plans are closed.
Stock options were granted to the Board of Directors andmanagers. The option plans are cash-settled and the fairvalue of the options was linked to the share price development. Based on the share price at each quarter end the fairvalue of the options – based on the ’Hull-White’ option
model – was calculated by an independent specialist. Basedon these fair values the year-end value of options was
adjusted.
The Performance Share Plan (PSP) was granted to managers
and was considered to be equity-settled. The fair value ofthe 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 until 31 March 2011.
During 2011/12, the Performance Share Plan was settled.
The agreements for Chinese and Japanese employees wereamended and settled in cash. The cash settlement concerned 1’136 shares for which a total amount of CHF 0.65
million was paid. The remaining 4’828 shares were transferred to employees generating a net impact in the equityof CHF 0.22 million.
Stock option plans
The stock option plans were cash-settled. The total amount
expensed for the options not yet exercised was determinedby reference of the fair value of the instruments granted ateach closing period. The quarterly fair value calculations
were performed by a third party applying the ’Hull & White’model based on LEM’s share price at the period end. The
pro rata payable was calculated based on the fair value andthe estimate of the number of options that were expected
to become exercisable and LEM recognized the impact in
the income 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 the following fiscal year. The estimated payments are accrued forper year-end.

LEM | Annual Report 2011/12

41

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 replace­p ro­d ucts 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.

LEM | Annual Report 2011/12

42

Treasury shares
Own equity instruments which are reacquired (treasury
shares) are recognized at cost and deducted from equity.
No gain nor loss 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 the consideration is recognized in retained
earnings.
2.19 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 sig­ni­f icant risks and rewards of ownership of the goods havepassed to the buyer, usually on delivery of the products.
2.20 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.
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 carriedforward 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.

3 Segment information
Business segment information
Industry
In CHF thousands

Income Statement
Sales
EBITDA
Operating profit
Net financial expense
Taxes
Net profit for the year

2011/122010/112011/122010/11208'292
39'49030'257

272'659
59'60752'69428'042
5'132
4'229

23'544
3'443
2'293

236'334
44'62234'486(1'962)(4'037)28'487296'203
63'05054'987(4'622)(10'722)39'643

5'902
1'221
2'110

4'770
1'483
660

898
5

1'144
6

6'800
1'226
2'110

5'914
1'489
660

9'233

6'913

903

1'150

10'136

8'063

283(4'883)

32

(543)

315

(5'426)90'042120'791

12'203

9'795

90'042120'791

12'203

9'795

102'245
30'26921'121
9'148
132'514130'586
31'39327'231
4'162
161'979

34'331

48'106

3'153

1'657

37'48415'4698'244
2'407

49'76315'3037'560
3'186

34'331

48'106

3'153

1'657

4'818
52'953

4'557
65'066

7'855
537
8'392

8'899
345
9'244

564
13
577

249

8'419
550
8'969

9'148
345
9'493

Significant non-cash items(Increase) /decrease of liabilities forshare-based payments

Segment liabilities
Unallocated liabilities
Of which income tax payable
Of which deferred withholding
tax liability
Of which other unallocated liabilities
Total liabilities

LEM Group

2010/11

Depreciation and amortization:
Tangible assets
Intangible assets
Impairment loss
Goodwill impairment
Total

Balance sheet
Segment assets
Unallocated assets
Of which cash and cash equivalents
Of which other unallocated assets
Total assets

Automotive

2011/12

Capital expenditure:
Tangible assets
Intangible assets
Total

249

Geographical information
Germany

USA

China

Japan

Italy

Switzerland

Rest of the world LEM GroupIn CHF thousands

2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11

Sales

46’311

Non-current assets

56’58440’48941’48337’04150’48624’64926’912

13’696

9’045

6’825

7’220

12’35629’902

5’133

9’827

70’35581’009 236’334 296’203

15’203

19’594

1’959

1’854

LEM | Annual Report 2011/12

43

37’68337’713

For management purposes, LEM Group is organized into
two operating segments, Industry and Automotive. The
Industry 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.

Non-allocated assets correspond to cash, non-current
financial receivables as well as deferred tax assets. Nonallocated liabilities comprise bank borrowings, income tax
payable and deferred tax liabilities.
Transactions between the subsidiaries and/or business segments are conducted at arm’s length.

The depreciation and amortization charge for the Industry segment at 31 March 2012 includes the impairment of productionlines specific to several families of products for CHF 2’110 thousand. Please refer to note 8 Property, plant and equipment
for more detail.
4 Accounts receivable
In CHF thousands

31.3.2012

31.3.2011

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

39'419(1'711)37'708
4'432
42'14054'828(1'229)53'5996'427
60'026

In CHF thousands

2011/122010/11

Opening position

1'229

1'424

Additions charged to income statement
Amounts written off
Foreign exchange effectClosing position

723
(235)
(6)
1'711

333
(472)
(56)
1'229

Movements of allowance for doubtful accounts

Aging analysis of accounts receivable
In CHF thousands

Not due< 30 days

31–90 days

91–180 days

>180 days

Total

31 March 2012
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

26'376(306)
4'381
30'451

8'204

2'004
(77)

1'130
(266)

1'705
(1'062)

51
8'255

1'927

864

643

39'419(1'711)
4'432
42'14031 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
60'026

The allowance for doubtful accounts is computed as a percentage of aged balances. No receivables have been individually
impaired.

LEM | Annual Report 2011/12

44

5 Inventories
In CHF thousands

31.3.2012

31.3.2011

Raw materialWork in progress
Finished goods and goods for resale
Total

11'534
2'682
12'38926'60515'481
3'167
15'54034'187

Above total inventories include provisions for write-down of CHF 4’970 thousand (2010/11 CHF 5’630 thousand).
6 Other current assets
In CHF thousands

31.3.2012

31.3.2011

960
1'809
187
2'956

681
1'036
0
1'717

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Total
For further information on derivative financial instruments, see note 26.

7 Cash and cash equivalents
For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprise the following:
In CHF thousands

31.3.2012

31.3.2011

Cash and cash equivalents
Bank loans
Bank overdrafts
Total

21'121(3'000)0
18'121

27'231
0(618)
26'613The short-term bank loan disclosed above has been contracted with a one-month term and an interest rate of 0.82%.

LEM | Annual Report 2011/12

45

8 Property, plant and equipment
In CHF thousands

Land and buildings

306
(5)

Machinery andequipment

Total

25'612
(210)
8'419
(738)
(2'110)(6'800)
24'173

Net book value 1 April 2011
Foreign exchange effectInvestment
Disposal
Impairment gain (loss)
Depreciation charge for the year
Net book value 31 March 2012

(104)
197

25'306
(205)
8'419
(738)
(2'110)(6'696)
23'976

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2012

441
(244)
197

68'434(44'458)
23'97668'875(44'702)
24'173

Net book value 1 April 2010
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2011

330
(11)

(13)
306

23'335(1'185)9'147(90)(5'901)25'30623'665(1'196)
9'147(90)(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)
25'612

LEM Group owns production lines which are primarily used
to manufacture goods for the solar market. The slump in thesolar market demand has given the Group an indication to
perform an impairment test per 31.3.2012.
The recoverable amount of the machines has been determined based on a value in use calculation using cash flow
projections from management estimates. The pre-tax discount rate applied to the cash flow projections is 8.5%.
As a result of the analysis, management has recognized an
impairment charge of CHF 2’110 thousand against the value ofthe machines previously carried at CHF 6’646 thousand, whichis recorded in cost of goods sold in the Industry segment.

LEM | Annual Report 2011/12

46

9 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

Net book value 1 April 2011
Foreign exchange effectInvestment
Disposal
Other movements
Amortization charge for the year
Net book value 31 March 2012

3'601
(33)

3'302

3'568

(990)
2'312

893
(18)
550
(128)
(284)
(236)
777

7'796
(51)
550
(128)
(284)
(1'226)
6'657

At cost of acquisition
Accumulated amortization
Net book value 31 March 2012

5'291
(1'723)
3'568

4'952
(2'640)
2'312

4'204
(3'427)777

14'447(7'790)
6'657

Net book value 1 April 2010
Foreign exchange effectInvestment
Disposal
Impairment gain (loss)
Amortization charge for the year
Net book value 31 March 2011

3'667
(66)

5'154

876
(12)
345
(19)

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

3'601

(660)
(1'192)
3'302

(297)
893

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

5'329
(1'728)
3'601

4'952
(1'650)
3'302

4'101
(3'208)893

14'382(6'586)
7'796

In the financial year under review, no development costs
have been capitalized (CHF 158 thousand at 31.3.2011).
The entire goodwill of LEM Group is from the acquisition of
NANA in 2000/01 and is allocated to the cash generating
unit LEM Japan KK. The goodwill relates to the Industry
segment. The recoverable amount has been determinedbased on value in use calculations. These calculations use
cash flow projections of 5 years based on financial businessplans 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 pre-tax discount rate usedwithin these cash flow calculations is 8.5% (2010/11 8%)
and is based on the weighted average cost of capital of apeer group. The carrying value of the cash generating unit
including goodwill was compared to the value in use and no
impairment was found for the year ended 31 March 2012.
Two patents have been activated in the course of LEM Danfysik acquisition in 2009/10 for a total amount of CHF 5’940
thousand. For one of them (gross value of CHF 990 thousand less CHF 330 thousand depreciation at the end of
March 2011), we had plans to develop a product.
The majority of the 2010/11 amortization charge is related
to the depreciation of patents acquired in the course of the
LDK acquisition. These have been accounted for in R&D
costs (including the impairment charge referred to above).
The depreciation charge for other intangible assets has
been included in the sales and administration expenses.

LEM | Annual Report 2011/12

47

10 Other non-current assets
In CHF thousands

31.3.2012

31.3.2011

2'873
495
3'368

2'115
66
2'181

In CHF thousands

31.3.2012

31.3.2011

Accounts payable – trade
Other payables
Total

16'319
1'544
17'86327'275
2'342
29'617

Claims and litigations

Transfer of activity

Total

1'945
1'911
(486)
(330)
7

(0)
453

(580)
0

3'047

453

2'525
2'364
(486)
(330)
7
(580)
3'500
3'043
457

1'353
16
(250)
(462)
(77)
580

704
2'236
(723)
(264)
(8)
1'945

(0)

Pension asset
Other non-current assets
Total
11 Accounts payable

12 Provisions
Employee and­­t ermination benefits

In CHF thousands

Balance 1 April 2011
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effect
Other movements
Balance 31 March 2012
Of which current
Of which non-current

580

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

Employee and termination benefits
Employee and termination benefits contain obligations
which are required in certain countries. The total amount
has been reclassified into long-term liabilities since the obligations are post-employment benefit plans.
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 andthe risk assessment of management. The warranty provision
is expected to be used over the next five years.

LEM | Annual Report 2011/12

48

(0)

2'057
2'252
(973)
(726)
(85)
2'525
1'556
969

Transfer of activity
On 20 March 2012, LEM launched the relocation of the highprecision manufacturing and R&D activity from Denmark to
Geneva. A CHF 370 thousand provision has been booked
at 31.3.2012 in relation with this transfer of activity.

13 Other liabilities
In CHF thousands

31.3.2012

31.3.2011

0
634
640
1'274
632
642

1'612
66
1'232
2'910
2'821
89

Stock option plans
Post-employment benefit plans
Other liabilities
Total
Of which current
Of which non-current

Stock option plans
All stock option plans are closed per 31.3.2012. Refer toaccounting policies 2.16 Employee benefits, 2.17 Provisions
and contingent liabilities and note 22 Stock option plans,Performance Share Plan.
14 Equity
Share capital
There is no authorized or conditional share capital outstanding.
The nominal share capital of CHF 570’000 comprises
1’140’000 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.
On 4 July 2011, LEM Holding reduced its capital by 10’000
shares of CHF 0.5 each by the cancellation of the 10’000
own shares previously acquired for a total amount of CHF
3.97 million.
On 31 March 2010, LEM owned 5’232 treasury shares.
In July 2010, 600 PSP shares were paid out to a retiring
former Senior Management member. In July and August
2010, 1’385 shares were sold to employees at market valueless CHF 15 discount per share with an average price of
CHF 326.73. The treasury shares were booked out at historical cost and the difference to the selling price wasbooked to retained earnings.

Terms of options
Transaction
date

Numberof options

Strikeprice

Premiumpaid

Exercise period

20.9.2008 15'000
20.9.2008 15'000

360
390

61.7
55.1

1.3.2011–30.4.2013
1.3.2012–30.4.2013

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
thousand including the initial cost paid to acquire theoptions.
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 fiscal year 2010/11.
On 1 September 2010, LEM had launched a share buy-backprogram which ran 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 were earmarked for cancellation. LEM has terminated its share buyback program per 23 May 2011.
During the year 2011/12, LEM acquired 1’169 treasury
shares for a total amount of CHF 542 thousand, in the frameof its market making contract started on 1 July 2011.

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

LEM | Annual Report 2011/12

49

Movement of treasury shares
In CHF

Number of shares

Average purchase
price

Total

Balance 1 April 2011
Movement
Balance 31 March 2012
Ordinary dividend per share
Extraordinary dividend per share

18'247(13'659)
4'588
25.00
0.00

388.62373.91432.397'091'113(5'107'286)
1'983'827

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

5'232
13'01518'24740.00
0.00

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 28 June 2012.
15 Staff cost
In CHF thousands

2011/122010/11

Production
Sales
Administration
Research and development
Change in liability for stock option plans and Performance Share Plan
Total

(19'686)(12'009)(13'560)(8'984)(190)(54'429)(24'616)(12'569)(13'830)(7'989)(6'052)(65'056)

Salaries and wages
Other personnel costs
Temporary employee costs
Change in liability for stock option plans and Performance Share Plan
Total

(36'898)(13'354)(3'987)(190)(54'429)(39'123)(13'998)(5'883)(6'052)(65'056)

Other personnel costs comprise the expenses for defined contribution plans of CHF 418 thousand (2010/11 CHF 476 thousand).
See accounting policies 2.16 Employee benefits, 2.17 Provisions and contingent liabilities and note 22 Stock option plans,Performance Share Plan.
Number of employees at the end of the financial year
Permanent employees
Temporary employees
Apprentices
Total

31.3.2012

31.3.2011

1'100
25
11
1'136

1'215
89
12
1'316

In CHF thousands

2011/122010/11

Interest expense
Other financial expense
Total

(248)
(111)
(359)

(223)
(252)
(475)

16 Financial expense

LEM | Annual Report 2011/1250

17 Financial income
In CHF thousands

2011/122010/11

101
101

116
116

In CHF thousands

2011/122010/11

Exchange losses
Fair value revaluation on derivatives
Gains and losses on derivatives 1
Total(2'170)198
268(1'704)(4'664)(15)416(4'263)

2011/122010/11(9'156)
2'441
29
420
888
1'341
(4'037)(10'978)
(302)
220
257
0
81
(10'722)

Interest income on cash
Total
18 Exchange effect1

Position includes cost of derivative hedging

19 Income taxes
In CHF thousands

Current income taxes
Deferred taxes relating to the origination and reversal of temporary differences
Previously unrecognized deferred tax asset used to reduce current tax expense
Previously unrecognized deferred tax asset used to reduce deferred tax expense
Deferred tax income resulting from reduction in tax rates
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 %2011/122010/11

Group’s average expected income tax rate
Group’s average expected withholding tax rate
Group’s average expected tax rate

16.5
1.3
17.8

19.8
1.0
20.8

Tax effect of_ _ expense not deductible for tax purposes_ _ permanent differences_ _ effect of changes in tax rates on deferred taxes_ _ adjustment in respect of previous’ periods income tax_ _ recognition of previously unrecorded tax losses_ _ other differences
Group’s effective tax rate

1.8
1.1
(2.7)
(4.1)
(1.4)
(0.1)
12.4

1.1
0.3
0.0
(0.2)
(0.9)
0.2
21.3

LEM | Annual Report 2011/12

51

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.
Following its qualification as High and New Technologies
Enterprise in China, LEM China enjoys reduced income tax
rates from 2011 to 2013. The status will need to be confirmed
in 2012 and 2013. Depending on the legal situation in the
People’s Republic of China, this status can possibly be
renewed for 2014-2016.

Following the new double taxation agreement between
Japan and Switzerland, no withholding tax on dividends isdue anymore. The liability booked at 31.3.2011 for CHF 1.2
million has been reversed and has generated an income inthe deferred tax movement of the year.
The two before mentioned events have contributed to significantly decrease this year’s effective tax rate compared
to last year. For the coming years, this impact should bemaintained, yet at a lower level.

Deferred tax assets and liabilities
In CHF thousands

31.3.2012

31.3.2011

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

759
(150)
368
1'590
(633)
(603)
187
(1'491)431
0485(2'407)(732)(1'325)
(252)
(10)
(7)
(621)
(434)
(1)
(2'297)36
167
686(3'186)(3'622)

3'485

1'919

(4'217)(732)(5'541)(3'622)31.3.2012

31.3.2011

0
0
101
101

0
0
1'038
1'038

The balance sheet contains the following:_ _ Deferred tax assets_ _ Deferred tax liabilities
Net liabilities
Unused tax loss carry-forwards not recognized in the balance sheet expire
In CHF thousands_ _ In the next 10 years_ _ Until 2020
_ _ Without date of expiration
Total

LEM | Annual Report 2011/12

52

20 Earnings per share
2011/122010/1128'487

39'592

1'150'000
1'140'000
1'142'575
8'080
1'134'495

1'150'000
1'150'000
1'150'000
8'655
1'141'345

25.11

34.69

Basic earnings per share
Net profit for the year attributable to LEM shareholders – in CHF thousands
Ordinary number of shares at the beginning of the year
Ordinary number of shares after capital reduction
Weighted average number of ordinary shares
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

28'487

39'592

1'134'495
0
1'134'495

1'141'345
5'964
1'147'309

25.11

34.51

Earnings per share – diluted in CHF

21 Related parties
Related parties are the Board of Directors and the Senior Managers as defined in the Corporate Governance guidelines.
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 2011/12, no 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

2011/122010/11

Base salary
Additional fees
Change in liability for stock option plans
Total

(684)
(20)
0
(704)

(640)
0
(39)
(679)

2011/122010/11(1'613)(1'035)(149)
0165(2'632)(1'473)
(965)
(160)
(443)
(2'538)(5'579)Compensation of the Senior Management
In CHF thousands

Base salary
Bonus
Post employment benefits
Termination benefits
Change in liability for stock option plans and PSP
Total

For details on the compensation of the Board of Directors and of the Senior Management, please refer to note 10 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 22 Stock option plans, Performance Share Plan.

LEM | Annual Report 2011/12

53

22 Stock option plans, Performance Share Plan

2011/12

Number ofoptions Number of Number of­o utstanding
options
options
Grant date
1.4.2011
issued cancelled

SOP 6 1.4.2007
Total

2010/11

4'952
4'952

0
0

0
0

Number ofoptions Number of Number of­o utstanding
options
options
Grant date
1.4.2010
issued cancelled

SOP 5 1.4.2006
SOP 6 1.4.2007
Total

17'35023'44440'794000Number of
Number ofoptions
options ­o utstanding­e xercised
31.3.2012(4'952)(4'952)

Number of
Number ofoptions
options ­o utstanding­e xercised
31.3.2011

0 (17'350)
0 (18'492)
0 (35'842)

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 cash
settled as of 31 December 2007.
The plan gave the right to cash the counter value of one
share at the predetermined exercise price, which corresponded to the average share price of the fourth quarter
2006/07.
The number of stock options granted depended on the performance of LEM’s share price compared to the SIX Index
for Small and Mid Cap Companies in Switzerland for thefinancial year 2006/07.
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 2010/11, 18’492 options were exercised. The average share price for the exercised options
was CHF 429.05.
During the financial year 2011/12, 4’952 options were exercised. The average share price for the exercised options
was CHF 499.66.
At 31 March 2012, the SOP 6 has expired and all options
have been exercised.
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
the achievement 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 three
years vesting period and for which the multiple for the eventual payout could vary between m=0.5 and m=2.0. The PSP
expenses have been recorded in the income statement
straight-line over the three years vesting period.
The expense was adjusted at every reporting date basedon the expected number of shares that the participants
would receive at the end.
LEM | Annual Report 2011/12

54

0
0

0
4'952
4'952

Exercise
pricein CHF

Fair value
at grant
in CHF240.52

64.92

Exercise
pricein CHF

Fair value
at grant
in CHF139.80240.52

47.69
64.92

Fair value
31.3.2012
Exercisein CHF period from

Exerciseperiod until

N/A 1.4.2010 31.3.2012

Fair value
31.3.2011
Exercisein CHF period from

Exerciseperiod until

N/A 1.4.2009 31.3.2011
325.63 1.4.2010 31.3.2012

Terms of PSP
At grantm (multiple)
Number of shares expected to beissuedVesting period
Allocated to recipients
Fair value per unit (CHF)

1.0
8'360
3 years
27.6.2008
303.50

As of 31 March 2011, based on a pay-out 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).
In June 2011, the Performance Share Plan was settled. The
agreements for Chinese and Japanese employees wereamended and settled in cash. The cash settlement concerned 1’136 shares for which a total amount of CHF 650
thousand was paid. The remaining 4’828 shares were transferred to employees generating a net impact in the equityof CHF 91 thousand.
During May 2009, the Board of Directors decided not toissue further equity-based compensation plans. The company administrated the legacy programs until the expiry of
the last plan (SOP 6) in March 2012 and the settlement of
the Performance Share Plan in the first quarter of 2011/12.
In July 2010, the Board has made an 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.
23 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.

During the fiscal year 2011/12, the Group moved all its Swiss employees from its former autonomous pension foundation
into a separate collective foundation. The new foundation continues to qualify as a defined benefit plan under IFRS.
It is to be noted that this change has had no impact on the benefits.
The following table provides a reconciliation of the changes in the net benefit obligation.
Net benefit expense
In CHF thousands

31.3.2012

31.3.2011

Current service cost
Interest cost
Expected return on plan assets
Employee contributions
Amortization of gains and losses
Net benefit expense losses

2'970
1'145
(1'450)(1'557)
460
1'568

2'611
866
(1'197)(1'283)97
1'094

Costs related to the pension plan were charged to the different functional departments based on salary costs.
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

38'162
1'145
2'970(4'248)(2'802)35'22728'876
866
2'611
1'630
4'179
38'162

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

32'214
1'450
3'882(4'248)(969)
32'32926'607
1'197
3'000
1'630
(220)
32'214

In CHF thousands

31.3.2012

31.3.2011

Present value of funded obligations
Fair value of plan assets
Funded status
Unrecognized net actuarial losses
Net liabilities / assets (–)

35'227(32'329)
2'898(5'771)(2'873)38'162(32'214)
5'948(8'063)(2'115)

LEM expects to contribute CHF 1’818 thousand to its defined benefit plan in 2012/13.
Net pension liabilities / assets

Actual return on plan assets for 2011/12 was CHF 481 thousand (2010/11 CHF 977 thousand)

LEM | Annual Report 2011/12

55

Comparison of amounts
In CHF thousands

31.3.2012

31.3.2011

31.3.201031.3.200931.3.2008

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

32'32935'227(2'898)(969)(2'779)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)Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together withthe contribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. Estimatedreturns 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

2011/122010/11

40.0
50.0
5.0
5.0
100.0

29.5
54.0
5.0
11.5
100.0

32.0
56.0
5.0
7.0
100.0

2011/122010/11

2.50
1.50
0

3.00
1.50
0

6.50
3.50
2.50

6.50
3.50
2.50

In CHF thousands

31.3.2012

31.3.2011

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

4'460
18'844
6'469
29'773

4'003
19'971
14'134
38'108Equity 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
24 Operating lease commitments
Minimal lease payments are payable as follows:

In 2011/12 lease expenses amounted to CHF 4’920 thousand (2010/11 CHF 4’496 thousand).
Lease agreements exist for the business facilities used by the Group companies. The agreements are classified as operating leases.
The leases have varying terms and renewal rights between one and fifteen years.
25 Contingent liabilities
In CHF thousands

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

31.3.2012

31.3.2011

0
1'818
1'818

2'000
1'601
3'601

On 31 March 2012 the Group has no contingent assets. Contingent liabilities include bank guarantees on various matters,
no material liability is expected to occur in the ordinary course of business.

LEM | Annual Report 2011/12

56

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.
26 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

31.3.2012
Fair value

31.3.2011
Fair value

Loans andreceivables

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

21'12142'140
1'996
495
65'652

27'23160'026
1'037
66
88'360X
X
X
X

In CHF thousands

31.3.2012
Fair value

31.3.2011
Fair value

Financialliabilities

Accounts payable
Accrued expenses
Other current liabilities
Bank loans
Bank overdrafts
Other non-current liabilities
Total

17'86314'855
632
3'000
0
642
36'99229'617
16'294
2'821
0
618
89
49'439

X
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.
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 assets at fair value amount to CHF 187

During the two last reporting periods, there were no transfers
between Level 1 and Level 2 fair value measurements, andno 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 specific currency 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 3–9 months basis.
For the EUR, the Group has adopted a 100% cover on a rolling
12 months basis. It is the Group’s policy to negotiate the termsof the hedge derivatives to match the terms of the hedged
items, and therefore 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 sensitivity analysis for currency risk below.

thousand per 31.3.2012 (financial liabilities of CHF 12 thousand per 31.3.2011), are all classified under level 2.

LEM | Annual Report 2011/12

57

Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31.3.2012 with a
5% change in the USD, EUR, GBP, CNY and JPY with allother variables held constant of the Group’s profit before
tax (due to the changes 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 ±560 thousand for a ±5% EUR ratechange (CHF ±895 thousand per 31.3.2011), of CHF ±433
thousand for a ±5% USD rate change (CHF ±813 thousand
per 31.3.2011) and of CHF ±285 thousand for a ±5% CNY
rate change (CHF ±498 thousand per 31.3.2011). For othercurrencies, 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. The
maximum exposure is the carrying amount as disclosed innote 4.

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 equivalents, 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, based on the carrying
value of borrowings reflected in the financial statements.
The financial liabilities maturity is less than one year.

Financial liabilities
In CHF thousands

31.3.2012

Less than
one yearAccounts payable
Accrued expenses
Other current liabilities
Bank loans
Bank overdrafts
Other non-current liabilities
Total

17'86314'855632
3'000

17'86314'855
632
3'000

642
36'99236'350Interest rate risk
The Group’s exposure to the risk of changes in market interest
rates with the current financial leverage is very low. Per
31.3.2012, there are bank loans of CHF 3.0 million bearing
interests.
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 investors,
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.

LEM | Annual Report 2011/12

58

Over one year

642
642

31.3.2011

Less than
one year

29'617
16'294
2'821

29'617
16'294
2'821

618
89
49'439618
49'350Over one year

8989

27 Scope of consolidation
Full consolidation

Country

Currency

Share capital

Ownership

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

60'00075'000
120'000
570'000
100'000
25'0008'500'000
2
6'600'000
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
LEM Electronics (China) Co. Ltd
LEM Japan KK

China
Japan

CNY
JPY

53'153'194
16'000'000

100%
100%

On 28 September 2010, the Group has acquired the remaining 10% non-controlling interests in TVELEM, the percentage of interest in TVELEM is now 100%. This increase ininterest led to the recognition of CHF 18 thousand in equity(difference between amount paid and non-controlling interests value) per 30 September 2010.
28 Changes in scope of consolidation
During the fiscal year 2011/12, there has not been any
change in the scope of consolidation.
29 Events after the balance sheet date
LEM has decided to separate the activity of LEM SA into
two distinct companies. LEM Intellectual Property SA will
be in charge of the intellectual property of the Group, with
its offices in Fribourg; LEM Switzerland SA will be responsible for the Swiss production and contract R&D activities,
with its office in Geneva. This change will occur during
2012/13. At 31 March 2012, LEM consolidated financial
statements include a CHF 100 thousand deposit for thecompany under constitution at that date.
LEM has launched a project aiming to simplify the structureof its European agency companies and to save administrative cost. LEM will convert some or all of its European entities
into branches of a European head office. No employments
will be cancelled as a consequence of the above-mentioned
undertakings.

LEM | Annual Report 2011/12

59

Auditor’s 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
33 to 59), for the year ended 31 March 2012.
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.
Auditor’s 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 Auditing Standards and International Standards on Auditing.
Those standards require that we plan and perform the audit
to obtain reasonable assurance whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected dependon the auditor’s judgment, including the assessment of therisks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making thosePhilippe Stöckli
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2011/12

risk assessments, the auditor considers the internal control
system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign 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
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 is sufficientand appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for theyear ended 31 March 2012 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 licensing
according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there areno 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, 25 May 2012
Ernst & Young Ltd

Laurent Bludzien
Licensed audit expert

60

LEM Holding SA
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . 65
Proposed Appropriation of Retained Earnings . . . . . . .

70

Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

LEM | Annual Report 2011/12

61

LEM | Annual Report 2011/12

62Balance Sheet(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.2012

31.3.2011

4'141
1'984
538
22'76929'432

9'947
7'091
62
8'687
25'78753'68753'687

53'63053'630

83'11979'41731.3.2012

31.3.2011

3'000
2'518

614
2'238

5

25'13830'657

12'43315'285

2

570
288
1'984
11'86137'75952'462575
22'580
7'091
19'683
14'20364'132

83'11979'417

Current assets
Cash and cash equivalents
Treasury shares
Other current assets
Group current assets
Total current assets
Non-current assets
Investments in subsidiaries
Total non-current assets

3
5

4

Total assets

Liabilities and Equity
In CHF thousands

Notes

Current liabilities
Current financial liabilities
Other current liabilities
Group current liabilities
Total current liabilities
EquityShare capital
General reserve
Reserve for treasury shares
Retained earnings
Net profit for the year
Total equity

3

Total liabilities and equity

LEM | Annual Report 2011/12

63

Income Statement

IncomeIn CHF thousands

Notes

2011/122010/1135'648
391
2'055
4'159
0
42'253

6'582
229
4'802
4'391
0
16'004Notes

2011/122010/116(3'335)(305)(912)(4'552)(1'350)(299)(1'236)(2'885)37'701

13'11958
37'7591'084
14'203Financial 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

LEM | Annual Report 2011/12

764

Notes to the Financial Statements
1 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.

2 Share capital

Opening capital 1.4.2011
Change of capital
Closing capital 31.3.2012

Number of shares

Par value pershare in CHF

Capital in CHF
thousands

1'150'000(10'000)
1'140'000

0.50
0.50
0.50

575
(5)
570

On 4 July 2011, LEM Holding reduced its capital by 10’000 shares of CHF 0.50 each by the cancellation of the 10’000
own shares previously acquired for a total amount of CHF 3.97 million.
3 Treasury shares
Number of shares

Price pershare in CHF

Value in CHF
thousands

Value 1.4.2011
ChangeValue 31.3.2012

18'247(13'659)
4'588

388.62373.91432.39

7'091(5'107)
1'984

Value 1.4.2010
ChangeValue 31.3.2011

5'232
13'01518'247312.50419.22388.62

1'635
5'456
7'091

Treasury shares LEM Holding SA

In August and September 2010, 1’385 shares were sold to
employees at market value less CHF 15 discount per sharewith an average price of CHF 326.73. The purpose was todiminish the SOP 6 before the contractual term (31 March2012). The treasury shares were booked out at historicalcost and the difference to the selling price was booked tothe profit and loss account (net impact CHF 55 thousand).
In September 2010, 600 PSP shares were paid out to a former Senior Management member.
On 1 September 2010, LEM has launched the share buyback program which ran for one and half years covering a
volume of up to CHF 15 million on a second trading line.
10’000 shares have been bought for a total amount of CHF
3.97 million. These shares were earmarked for cancellation.
LEM has terminated its share buy-back program per 23 May
2011.
On 4 July 2011, LEM Holding reduced its capital by 10’000
shares of CHF 0.50 each by the cancellation of the 10’000
own shares previously acquired for a total amount of CHF
3.97 million.

In the first quarter 2011/12, the Performance Share Plan was
settled. 4’828 shares were transferred to subsidiaries, generating a net impact in the equity of CHF 1.08 million. The
agreements for Chinese and Japanese employees wereamended and settled in cash by the subsidiaries.
During the year 2011/12, LEM acquired 1’169 shares for a
total amount of CHF 0.54 million, in the frame of its market
making contract started on 1 July 2011.
The movements in treasury shares during 2011/12 caused
an impact of CHF 1’144 thousand in retained earnings, ofwhich CHF 1’681 thousand through PSP shares, (542)through market making activities and 5 through the reduction of share capital.
Subsidiaries of LEM Holding SA did not own any shares of
LEM Holding SA.
Treasury shares are valued at lower of cost or market value.

LEM | Annual Report 2011/12

65

4 Investments in subsidiaries
In CHF thousands

31.3.2012

31.3.2011

Historical cost
Total

53'68753'687

53'63053'630

In CHF thousands

31.3.2012

31.3.2011

Current inter-company loans receivable
Inter-company accounts receivable
Total

22'082687
22'769

7'720
967
8'687

Current inter-company loans payable
Inter-company accounts payable
Total

25'027
111
25'138

12'37855
12'433

In CHF thousands

31.3.2012

31.3.2011

Office and administration expense
Consulting fees
Board member fees
Expenses for stock option plans exercised
Total(1'421)(1'210)(704)
0(3'335)

(586)
(64)
(640)
(60)
(1'350)31.3.2012

31.3.2011

(364)
469
(47)
58

(684)
1'936
(168)
1'084

Confer also note 27 Scope of consolidation of the consolidated financial statements.
5 Group current assets and liabilities

6 Office, administration and personnel expense

7 Income taxes
In CHF thousands

Current taxes
Adjustments of tax provisions of previous periods
Withholding taxes on paid and planned dividend repatriation
Total

8 Important shareholders according to art. 663c of the Swiss company law
31.3.2012
Shareholders with ownership above 3%:

Werner O. Weber and Ueli Wampfler, in Zollikon/Wollerau, Switzerland,through WEMACO Invest AG and PH Partner Holding AG,
in Zug/Cham, 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, USA, through Threadneedle
Asset Management Ltd, in London, United Kingdom
Montanaro Asset Management Ltd, in London, United Kingdom
Impax Asset Management Ltd, in London, United Kingdom

LEM | Annual Report 2011/12

66

31.3.2011

Sharesin %Sharesin %382'500

33.6

342'500

29.8

144'581

12.7

144'58112.6

101'044
89'50056'777

8.9%
7.9%
5.0%

96'15583'00060'003

8.4%
7.2%
5.2%

55'25135'400

4.8%
3.1%

42'77237'194

3.7%
3.2%

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

31.3.2012

31.3.2011

1'598

3'601

Annual salarycompensation

Additional fees

Cash-out for options
granted in prior years

171
95
76
95
143
105
685

–
10
10
–
–
–
20

Annual salarycompensation

Additional fees

Cash-out for options
granted in prior years

200
80
110
150
100
640

–
–
–
–
–
–

108
–
103
276
–
487

Amount of guarantees issued
10 Remuneration of Board of Directors and Senior Management
10.1 Compensation of active members of the Board of Directors
2011/12
In CHF thousands

Felix Bagdasarjanz 1
Ilan Cohen 2
Andreas Hürlimann
Anton Lauber 3Peter Rutishauser4, 5
Ueli Wampfler 6
Total

N/A

–

2010/11
In CHF thousands

Felix Bagdasarjanz 1, 3
Ilan Cohen
Anton Lauber 5Peter Rutishauser4, 6
Ueli Wampfler 2
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.
The Board of Directors decided to contribute the equivalentof 5% of his annual remuneration to LEM’s cost saving
efforts in 2011/12. The annual salary has been loweredaccordingly.
In 2011/12, an additional fee of CHF 10 thousand each wasawarded to Ilan Cohen and to Andreas Hürlimann 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 of Directors
Member of the Audit Committee
3
Member of the Nomination & Compensation Committee
4
Vice Chairman of the Board of Directors
5
Chairman of the Nomination & Compensation Committee
6
Chairman of the Audit Committee
1
2

LEM | Annual Report 2011/12

67

10.2 Compensation to active members of the Senior Management of the LEM Group
2011/12

In CHF thousands

Annual­s alary compensation

Annualbonus compensation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

Severance
payment

459

428

46

0

1'154

607

103

1'613

1'035

Annual­s alary compensation

François Gabella
President andChief Executive Officer
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

933

0

0

0

0

1'864

730

1'904

149

0

0

2'797

730

1'904

Annualbonus compensation 1

Company’scontribution
to pension
fund

Pensiondeparture
payment

Severance
payment

Total compensation

Cash-out
for options
granted inprior years

Pay-out of
PSP shares
granted inprior years

338

318

34

0

0

690

N/A

N/A

1'135

647

126

295

148

2'351

5'168

600

1'473

965

160

295

148

3'041

5'168

600

2010/11

In CHF thousands

François Gabella
President andCEO as of 1.7.2010
Senior Management(excl. CEO)
Total compensation to
Senior Management1 T he annual bonus compensation is shown with the accrual for the performance of the corresponding year, to be paid out in the following year. Allother elements are shown as paid out.

Senior Management decided to contribute the equivalentof 10% of its monthly remuneration for the duration of shortwork in LEM’s main sites, i.e. January to February 2012, toLEM’s cost saving efforts in 2011/12. The annual salary has
been lowered accordingly.
During May 2009, the Board of Directors decided not toissue further equity- or option-based compensation plans.
The company administrated 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
options plans, see note 22 Stock option plans, Performance
Share Plan in the consolidated accounts.
Highest total compensation
CEO François Gabella was the Senior Management member
with the highest total compensation in 2011/12 and in
2010/11.

LEM | Annual Report 2011/12

68

10.3 Shareholdings
Board of Directors

31.3.2012

In number of shares / options

Number ofoptions held

Number ofshares held

Number ofoptions held

1'736
120
211
1'000
2'606
25'00030'673

0
0
0
0
0
0
0

1'736
0
N/A
1'000
2'606
23'00028'342

0
0
0
0
0
0
0

Felix Bagdasarjanz
Ilan Cohen
Andreas Hürlimann
Anton LauberPeter Rutishauser
Ueli Wampfler
Total

Senior Management

31.3.2012

In number of shares/options

Number ofshares held

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

300
45
2'100
1'425
1'500
1'450
6'820

0
0
0
0
0
0
0

0
0
0
0
0
0
0

François Gabella, CEO
Julius Renk, CFO
Luc Colombel, Vice President, Automotive
Hans-Dieter Huber, Vice President, Industry
Jean-Marc Peccoux, Vice President, R&D
Simon Siggen, Vice President, Operations
Total

31.3.2011

Number ofshares held

31.3.2011

Number ofshares held

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

300
50
1'350
796
764
850
4'110

0
0
1'500
500
938
0
2'938

0
0
600
600
380
500
2'080

11 Business risk management
In accordance with Article 663b of the Swiss Code of Obligations, a risk management report was prepared for thefinancial year 2011/12.
The Senior Management of the Group assesses the business risks within its standardized analysis procedure.
The Group has a risk management system in place whichallows for the prompt identification and analysis of risks aswell as the initiation of an action plan.
The Board of Directors of LEM Holding SA took note of therisk management report and approved both the procedureand the content thereof.
The organization, principles and reporting of risk management are described in detail in the Corporate Governancesection 3 in this Annual Report.

LEM | Annual Report 2011/12

69

Proposed Appropriation of
Retained Earnings
Appropriation of available earnings
In CHF thousands

31.3.2012

31.3.2011

Balance brought forward from previous year

10'717

19'683

Variation of treasury shares and reduction ofshare capital during the year
Retained earnings

1'144
11'861

19'683

Reclassification from general reserve into available earnings
Net income for the year
Total available earnings

3
37'75949'62322'292
14'20356'178Proposal of the Board of Directors:
Ordinary dividend 1
Balance to be carried forward(28'385)
21'238(45'461)
10'7171

Excluding dividends on own shares held by LEM Holding SA

		The Board of Directors proposes the distribution of an ordinary
dividend of CHF 25 per share. Swiss withholding tax of 35%
will be deducted from the above when applicable.		
The proposed reclassification and appropriation of available
earnings is made in compliance with article 671 of the Codeof Obligations. 		

LEM | Annual Report 2011/12

70

Auditor’s Report
Report of the statutory auditor on the financial­s tatements
As statutory auditor, we have audited the accompanying
financial statements of LEM Holding SA, which comprisethe balance sheet, income statement and notes (pages 63
to 69), for the year ended 31 March 2012.
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.
Auditor’s 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 auditor’s 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 toPhilippe Stöckli
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 overall presentation of the financial statements. We believe thatthe audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements for the year ended
31 March 2012 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 licensing according to the Auditor Oversight 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, 25 May 2012
Ernst & Young Ltd

Laurent Bludzien
Licensed audit expert

LEM | Annual Report 2011/12

71

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

31.3.2012

31.3.2011

628
81
7
6
722

524
63
10
6
603

31.3.2012

31.3.2011

50.5
33.3

51.1
30.9

3.4
0.4
12.4
100.0

2.9
1.6
13.5
100.0

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

Share information
SymbolListingNominal value
ISIN
Swiss Security Number (Valor)
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
Market capitalization as per 31 MarchLEHN
SIX Swiss Exchange
CHF 0.50
CH0022427626
2’242’762
FY 2011/12

FY 2010/11

1'140'000
601
331
494.5
960
21.11
25
564

1'150'000
655
306.44
570
1'029
34.69
40
656

(In CHF millions)1
2

Source: SIX
Proposal of the Board of Directors to the shareholders’ meeting

Financial calendar of the financial year
1 April 2012 to 31 March 201328 June 2012

Ordinary shareholders’ meeting
Geneva Business Center, Petit Lancy

7 August 12
13 November 12
14 February 2013
5 June 201327 June 2013
2 July 2013
5 July 2013

First quarter results 2012/13
Half-year results 2012/13
Nine months results 2012/13
Year-end results 2012/13
Ordinary shareholders’ meeting
Dividend ex-date
Dividend payment dateContact
Julius Renk (CFO)
Phone +41 22 706 12 50
E-mail investor@lem.com
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Group Subsidiaries
LEM is a global player with production plants and development centers in Beijing (China), Geneva (Switzerland) andMachida (Japan) as well as adaptation centers in Russia
and the USA. 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 to www.lem.com > Contact > Sales Locator

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

LEM Management Services Sàrl
8, chemin des Aulx
CH-1228 Plan-les-Ouates> Martin Hofmann

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

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

LEM Deutschland GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau> Hartmut Graffert
LEM Electronics (China) Co. Ltd
28 Linhe Street, Shunyi
CN-101300 Beijing> Zonghui Zhang
LEM France Sàrl,
15, avenue Galois
F-92340 Bourg-la-Reine> Paul Leens
LEM Holding SA
8, chemin des Aulx
CH-1228 Plan-les-Ouates> Julius Renk
LEM International SA
8, chemin des Aulx
CH-1228 Plan-les-Ouates> Julius Renk
LEM Italia Srl
Via V. Bellini, 7I-35030 Selvazzano Dentro, PD> Paul Leens

LEM SA8, chemin des Aulx
CH-1228 Plan-les-Ouates> Simon Siggen
LEM Switzerland SA in foundation
8, chemin des Aulx
CH-1228 Plan-les-Ouates> Julius Renk
LEM UK Ltd
West Lancs Investment Centre
Maple View, White Moss Business Park
UK-Skelmersdale WN8 9TG, Lancashire> Paul Leens
LEM U.S.A., Inc.
11665 W. Bradley Road
USA Milwaukee, Wi 53224> Kimbel Nap
TVELEM Ltd
Staritskoye shosse 15
RU-170040 Tver
> Evgeny Maramygin

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

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Impressum
LEM Holding SA, Geneva
Phone +41 22 706 11 11
Fax +41 22 794 94 78
Concept and text
LEM
Sensus Investor & Public Relations, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, Illustrations
LEM
Aurélien Bergot / Pedro Neto Whitebalance StudioJasmin Viertl
Printing
Cavelti, Gossau

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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

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