Annual Report
2014/15
At the heart of power electronics

LEM | Annual Report 2014/15

AAir-conditioning systems
Air conditioning gives a comfortableroom environment all along the year.
An air-conditioning system has several
functions: heating, cooling and air
purification. The air goes through filters
to avoid dust and pollens, to prevent
allergies and respiratory problems.
Inverterization of air conditioners started with industrial andlight commercial systems. In central air conditioning (1), theair is cooled by blowing it over an evaporator filled with arefrigerant. Then the refrigerant is pumped into a condenser
where it releases the heat. A pump or compressor is used tomove the refrigerant, and a motor runs the compressor.
Today, also residential systems (2) increasingly use inverters
in order to reduce energy consumption, while improving comfort. Inverters sit inside the air conditioners to control the
motors, which drive the pumps and fans.

HLSR

Robust current measurement devices from LEM like the
HLSR models (A) or HO xxx-S models (B) are used by major
HVAC (heating, ventilating, and air conditioning) manufacturers worldwide. They allow reaching the desired temperature
quicker while consuming less electricity and operating more
quietly.

B

HO xxx-S

1

2
A

A
B
1
2

LEM | Annual Report 2014/15

B

HLSR
HO xxx-S
Central air-conditioning system
Room air conditioner

Table of Contents
LEM at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

8Business Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

LEM's Core Values....................................

14

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

15

Compensation Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

LEM Group
Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . 33

LEM Holding SA
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

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

72

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

74

Reporting period 1 April 2014 to 31 March 2015

LEM | Annual Report 2014/15

3

LEM | Annual Report 2014/15

4

Electric motorcycle
Electric motorcycles have clear advantages: no need to visit the gas station, nooil, no exhaust. Compared to a classicalcombustion engine, the direct-drive
power train is highly efficient and maintenance-free but requires a highly accurate torque control.
The electricity is stored on board in a rechargeable lithium-ion
battery (4), which supplies the direct-drive electronics (2). The
direct-drive electronics control and power the direct-drive
brushless motor (1). The direct-drive motor requires no shiftingand offers instant torque, so that the bike rider may simply
focus on enjoying the ride, without motor noise or fumes of
exhaust. Electric motorcycles provide for recharging the battery with the battery charger (3).

HAH1DRThe LEM HAH1 DR transducers (A) are used by the direct-drive
electronics for the motor torque control. They allow a dynamic
and accurate torque control.

4

3
A
2
1
A
1
2
3
4

HAH1DR
Direct-drive brushless motor
Direct-drive electronics
Battery charger
Lithium-ion battery

LEM | Annual Report 2014/15

5

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 electrical parameters like current and voltage, are used in a broad range of applications. Although these devices are not visible to theoutside world, they are vital for application functionality and the benefits provided to the end users. Starting with products
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 microturbines and wind and solar power generation. Additional opportunities have been developed in the Automotive
market, such as battery management and start/stop applications for conventional cars and electrical motor controls,
battery pack management and embedded chargers for green cars. 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 of many
power electronics applications. LEM's strategy is to increase its technology leadership, efficiency and production flexibility. At the same time, LEM is committed to maintaining customer focus and operational excellence by running cost-effective and service-oriented production platforms. Profitable growth is a key objective.
Worldwide presence
LEM is a global organization with production plants in Beijing (China), Geneva (Switzerland), Machida (Japan) and in Sofia(Bulgaria). The Company has sales offices close to its main clients' locations and offers seamless service around the globe.

LEM Holding SA, Fribourg,
Switzerland
Production Centers (PDCs)
Beijing, China
Geneva, Switzerland
Tokyo, Japan
Sofia, Bulgaria
Adaptation Centers
Milwaukee, USA
Tver, Russia

Sales Offices
Geneva, Switzerland
Frankfurt, Germany
Vienna, Austria
Brussels, Belgium
Kgs. Lyngby, Denmark
Paris, France
Padova, Italy
Skelmersdale, UK
Tver, Russia
Beijing, Shanghai, Shenzhen, Xian, Hefei, China
Tokyo, Japan
Pune, India
Seoul, South Korea
Milwaukee, Columbus, Amherst,
Los Angeles, USA
Agents/Distributors

LEM | Annual Report 2014/15

6

Key figures 2010/11 to 2014/15
In CHF millions, %2010/112011/122012/13*2013/142014/15

Orders received

336.9

182.9

230.6

246.4

251.0

Book-to-bill ratio
Sales

1.14
296.2

0.77
236.3

0.98
235.0

1.00
245.6

0.97
257.8

Gross profit

126.3

96.5

98.6

115.4

118.4

In % of sales

42.6%

40.8%

41.9%

47.0%

45.9%

Operational EBIT

60.4

34.2

40.8

55.7

54.2

In % of sales

20.4%

14.5%

17.4%

22.7%

21.0%

Net profit for the year
EPS basic (CHF)
Dividend per share (CHF)

39.6
34.69
40.00

28.5
25.11
25.00

32.4
28.48
30.00

45.6
40.09
40.00

43.1
37.86
40.00**

Operating cash flow
Investing cash flow

30.0
- 9.4

46.7
- 9.1

46.2
- 10.4

40.6
- 8.7

50.2
- 9.7

In CHF millions, %31.3.1131.3.1231.3.1331.3.1431.3.15

Net financial assets/(liabilities)
Shareholders' equity
Equity ratio (in % of assets)

26.6
96.9
59.8%

18.1
79.6
60.0%

27.6
84.0
61.9%

24.6
94.2
65.1%

20.9
91.9
65.0%

Market capitalization
Employees (FTEs)

655.5
1'316

563.7
1'136

671.5
1'137

801.4
1'241

910.3
1'274

* Restatement following IAS19R application (pensions).
** Proposal of the Board of Directors to the ordinary General Meeting of the Shareholders 25 June 2015.

Sales per segment

Regional sales breakdown

In CHF millions

In CHF millions

300

300

250

250

200

200
150

272.7

208.3

97.4

97.5

110.0

98.1

104.1

84.3

90.4

103.2

117.5

43.0

42.1

46.5

45.1

42.7

10/11

11/12

12/13

13/14

14/15

150
200.0

211.1

221.0
100

100

50

50
0

149.1

23.5

28.0

35.0

34.6

36.7

10/11

11/12

12/13

13/14

14/15

Industry segment
Automotive segment

0

EuropeAsia
North America

LEM | Annual Report 2014/15

7Foreword
Dear Shareholders,
The financial year 2014/15 was another intense, good year for LEM. We continued along our growth trajectory, increasing
market share while also delivering robust sales growth and strong margins. Again, we launched a high number of new
products. Our strategy to diversify our production footprint and thus reducing the exposure to the Swiss franc limited thefinancial impact of the Swiss National Bank's decision to discontinue the minimum euro exchange rate and the following
sharp appreciation of the Swiss franc.
International footprint
Our February 2013 decision to start production in Bulgaria has helped us diversify and increase our cost-effective production capacities while simultaneously ameliorating our natural foreign currency hedge. With about 65% of production
from sites in low-cost countries in China and Bulgaria, we are convinced that LEM is well prepared for the future.
Nevertheless, given our Swiss franc cost base in SG&A and R&D, the sharp appreciation of the Swiss franc against theeuro adversely affects the Company in terms of both sales and operating margins. This stresses the importance of continuously reevaluating all our processes to determine their optimal location.
Strong market position
We have strengthened our market position in Industry markets by growing faster than our addressable market and also
faster than competition. Like last year, sales growth was strongest in China. Also the Automotive businesses continued
their growth, driven significantly by the green cars business in China where government support for electric vehicles had
an immediate positive effect on volumes.
Robust profitability
Sales reached CHF 257.8 million, an increase of 4.9% compared with the previous year and in line with our expectations.
At constant exchange rates, Group sales increased by 6.7%. EBIT came to CHF 54.2 million, compared with CHF 55.7
million in the previous year. EBIT included a negative currency impact of CHF 2 million in Q4 of 2014/15 following the
Swiss franc's sharp appreciation against the euro in mid-January 2015. The EBIT margin reached 21.0%. Our financial
result benefitted from our established foreign exchange hedging policy and recorded a revaluation gain, which partiallycompensated the revaluation of assets and liabilities. Net profit for the year amounted to CHF 43.1 million.
Changes in the Board of Directors
Peter Rutishauser, member of the Board of Directors since 2003, has announced his resignation on the date of the ordinary
General Meeting on 25 June 2015. During his tenure, Mr. Rutishauser played a pivotal role as Vice-Chairman in transformational projects, which helped shape LEM and delivered prosperous outcomes for shareholders, employees and customers.
Board and Management thank Mr. Rutishauser for his highly valuable work and wish him all the best for the future.
The Board of Directors proposes to elect Ulrich J. Looser (M. Sc. Physics, ETH Zürich; M.A. HSG, University of St.Gallen). Mr.
Looser is entrepreneur and partner with BLR & Partners, focusing on developing industrial companies by active personal ownership. Based on his current work as a chairman and board member of Swiss-based publicly listed and privately held companies he will contribute to the Company a breadth of functional experience and deep insights into various customer segments.
Dividend proposal to the ordinary General Meeting of the Shareholders
The dividend proposal of CHF 40 (stable versus the prior year) to be submitted by the Board of Directors to the forthcoming ordinary General Meeting is a sign of trust in the Company. The proposal follows LEM's dividend policy of distributing
significantly more than 50% of its consolidated net profit to shareholders and corresponds to a payout ratio of 105.7%.
ThanksOur customer and employee survey confirmed that customers hold LEM in very high esteem. It also highlighted that ouremployees are strongly committed to the Company and proud to work for LEM – we owe them special thanks. Our thanks
go also to our customers for their renewed trust in our Company as well as to our shareholders for their lasting confidence.

Andreas Hürlimann
Chairman of the Board of Directors

LEM | Annual Report 2014/15

8

François Gabella
Chief Executive Officer

Business Report
We got the year off to a strong start with robust growth in sales and solid operating margins. The sales growth was driven
by strong performance across all businesses in Asia, mainly in China, where we benefited from our strong foothold, andthe strategic decision to continuously renew our product range. The currency fluctuations that ensued following the Swiss
National Bank's decision to discontinue the minimum euro exchange rate led to a decline in Q4 of 2014/15 Swiss francsales along with a negative impact on EBIT, compared with the previous quarter. Nevertheless, we maintained a satisfactory profitability.
Continued sales growth
Sales in the financial year 2014/15 totaled CHF 257.8 million, an increase of 4.9% or CHF 12.1 million compared with theprevious year. At constant exchange rates, Group sales increased by 6.7%.
Key figures 2014/15
In CHF millions

Orders received
Sales
Book-to-bill
EBIT
Net profit

Q1

Q2

Q3

Q4

Total

64.7
65.0
1.00
13.5
10.7

61.9
66.5
0.93
16.0
10.8

63.8
64.7
0.99
14.3
11.7

60.6
61.5
0.99
10.3
10.0

251.0
257.8
0.97
54.2
43.1

The strongest sales growth was once again reported in China (+20%). China reinforced its position as LEM's largest market
with a share of 26% of sales, compared with 23% of sales in the previous financial year. Sales in Asia excluding China werealso robust with an increase of 6% while sales in Europe remained stable and sales in North America decreased by 5%.
Europe represented 38% of Group sales in the financial year 2014/15 and North America accounted for 17%.
In the financial year 2014/15, our gross margin decreased from 47.0% to 45.9% due to foreign exchange developments andprice pressure.
Sales, general and administrative spending (SG&A) increased because of higher IT spending and strategy consulting by
7.6% to CHF 64.2 million, representing 24.9% of sales compared with 24.3% in the previous reporting year. Research anddevelopment expenses (R&D) rose 6.2% to CHF 15.3 million. However R&D as a percentage of sales remained stable at
5.9%, which is above LEM's long-term average.
The euro's depreciation against the Swiss franc negatively impacted our EBIT margin in Q4 of 2014/15 to the amount of
CHF 2 million. EBIT for the full financial year 2014/15 declined by 2.7% from CHF 55.7 million to CHF 54.2 million. Our
EBIT margin for the financial year 2014/15 came in at 21.0%, down from 22.7% in the previous year yet still above our
EBIT margin target of 15% to 20%. We posted a net profit for the year of CHF 43.1 million.
Our balance sheet remains strong. As per 31 March 2015, total assets decreased to CHF 141.6 million. Shareholders'equity reached CHF 91.9 million, representing an equity ratio of 65.0% (65.1% as at 31 March 2014).
Cash flow from operating activities in the financial year 2014/15 was CHF 50.2 million (+23.7%) and free cash flow was
CHF 40.5 million (+27.1%).
Industry segment
We achieved market share gains across most businesses and continually strong growth in China. Sales increased by 4.7%
to CHF 221.0 million in financial year 2014/15. At constant exchange rates, sales increased by 6.7%. Sales in China wereup 18%. In light of this increase, China has expanded its position as the most important single country for LEM and now
accounts for 26% of Industry sales. Sales performance in Asia excluding China was also strong and increased by 8% whilesales in Europe remained stable and sales in North America decreased by 8%. Europe and Asia were the most importantregions, accounting for 43% and 44% respectively of Industry sales. 11% of Industry sales were generated in North America
in the financial year 2014/15. The EBIT margin came in at 22.6%, a strong result despite the negative impact following the
Swiss franc's sharp appreciation against the euro. Last year's EBIT margin was a record 24.1%.
Global economic recovery gained momentum with modest improvements seen in Europe and solid growth in North America.
GDP growth in China slowed down yet remained at a high level. We are still observing a continued relocation of certain target industries from the US to Asia and increasingly to Eastern Europe. Our competitive environment remains largely
unchanged.
Recently launched products have proven successful, some of which even helped tap new customers with new applications.
We improved our market position, particularly in the important Chinese market.

LEM | Annual Report 2014/15

9

Sales in the drives and welding business increased by 1% over the previous year. We observed stable demand across all
regions. Sales development was best in China and Japan while Europe and North America were rather slow. The positive
sales performance in Japan was driven by export-led growth due to the weakening Japanese yen.
The renewable energies & power supplies business benefitted from increasing investments in renewable energies in China
and India. Renewable energy markets continue to shift to China and Japan with local players becoming increasingly important. North American markets remained weak. We recorded support from offshore wind projects in Europe. Total sales
increased by 1%.
Sales in the traction business increased by 26% thanks to the recovery of infrastructure investments. Sales performance
was strong in China, Korea and India, not only for local markets but for export markets, as well. While interest in high-speed
train products was strong in China, international interest was directed toward light rail.
Activity in the high-precision business remained sluggish. Medical applications were stable while the market for test & measurement was characterized by low investments and strong competition. Total sales decreased by 13%.
In the financial year 2015/16 we aim to increase our market share. We will continue implementing our road map for existing
markets but also increase our focus on developing markets such as smart grid or HVDC. We will continue to launch innovative products next year.
Automotive segment
Sales in the Automotive segment reached CHF 36.7 million in the financial year 2014/15, representing an increase of 6.2%
compared with the financial year 2013/14. At constant exchange rates, sales grew by 6.4%. This growth is the result ofrobust battery management sales and continued recovery in the green cars business. Sales of green cars applications
peaked in Q4 of 2014/15, especially in China. Segment sales in North America (- 1%) and Europe (- 3%) were relatively
stable while sales in Asia grew by 16%. China represented the fastest growing single country in the Automotive segment,
as well, with sales up 32%. China represented 25% of segment sales in the financial year 2014/15 while the rest of Asia
accounted for 17%. North America remained the most important region with 49% of segment sales and Europe was thesmallest region at 8%. EBIT reached CHF 4.3 million, down 10.8% from the financial year 2013/14. The EBIT margin was
11.8%, compared with 14.0% in the previous year.
The global automotive industry continued to grow in 2014 and reached a new production volume record of 89.7 million
vehicles, representing an increase of 2.8% over 2013. All major markets contributed to the volume increase with growth
rates ranging from 1.5% in Japan to 7.3% in China.
Year-on-year sales in the conventional cars business grew by 4%. We added new customers and new platforms withexisting customers. In response to emerging market trends, we developed a new start/stop application for niche markets.
We also posted good results in connection with new battery pack monitoring products, which we launched very recently.
The green cars business benefitted from strong recovery among hybrid electric vehicles. China has recently rolled out aset of measures to promote the use of green cars triggering a sharp growth at the end of 2014 as a result. Thus, we saw
the strongest growth in China and we landed several new projects with Chinese car manufacturers. Korean sales increased,
too. Sales grew 15% compared with the financial year 2013/14.
We will maintain our high level of R&D spending in the financial year 2015/16 and that will put us in a position to launch aseries of new products. Our focus will be on dedicated products. The green cars business remains a priority for LEM;
accordingly, we will intensify our activities in this area.
Strategy implementation
Our February 2013 decision to start production in Bulgaria has allowed us to diversify and increase our cost-effective
production capacities while simultaneously ameliorating our natural foreign currency hedge. Nevertheless, the recent
sharp appreciation of the Swiss franc against the euro adversely affects the Company in terms of both sales and operating margins. In light of these circumstances, it has become more important to review and evaluate our processes todetermine their optimal location.

LEM | Annual Report 2014/15

10

We continue to implement our strategic priorities:– – Increase technological leadership

We once again made significant progress in our product development strategy and concluded the renewal of our product range. The new products offer our customers increased performance and new functions at a reduced cost.
In financial year 2014/15 we launched nine new products in three product families for Industry applications. The three
new products of the HO xxx-S open-loop family target drives, UPS and solar applications. They offer over-current detection
as a standard, a feature that meets emerging customer requirements. The new products are equipped with our latest
proprietary ASICs, deliver best-in-class performance and offer a modular concept that allows programming parametersin line with customers' specifications. The customer-specific HOI model features our proprietary ASICs with improved
accuracy. It is extremely compact given the high currents it measures. The LF product family, with four new products,
is a new generation of closed-loop transducers that feature our proprietary ASICs for closed-loop Hall effect technology.
They offer increased accuracy and a high level of immunity against surrounding perturbations. The new LF products are
geared toward drives, renewable energy and traction applications. The IT xx5 models feature fluxgate closed-loop technology with exceptionally high accuracy on a wide operating range. The IT xx5 series is used in test & measurement
applications. For Automotive applications, we have launched HAH3 DR S03, a new 3-phase transducer offering improved
performance at a lower cost for drive applications in hybrid cars. The new DAHBV2 is best suited for pulse current measurement in high-power and low-voltage automotive applications. The product is designed for applications for battery
pack monitoring, hybrid vehicle batteries, electric vehicles and utility vehicle batteries.
We are continuing to develop our external network through partnerships with universities and institutions. We also
embarked on a partnership initiative with the University of Sofia.
– – Increase efficiency of operations

One area of focus was on production cost management. Here we were able to achieve improvements in terms of supplier performance, internal efficiency and transfers of production. We have continued to expand our activities at our
new site in Sofia, Bulgaria. A comparison of the fourth quarter figures of 2013/14 and 2014/15 reveals that we haveincreased production at this site from 3.9% to 5.9% of the Group's total. As of 31 March 2015, we manufactured
9 product families in Sofia, all of which with the "Made by LEM" quality standards. Over the next few months we will betransferring additional production lines to the new site. The Sofia site is set to become a competence center in engineering for industrialization and new product development.
We upgraded our ERP (enterprise resource planning) system with the aim of increasing the speed and efficiency of ourinternal processes.
– – Increase production flexibility

Our customers' preference for short-term orders remained a challenge. We successfully managed both seasonal
factors, which occurred mainly in the solar businesses, as well as production transfers. Even under such challenging
circumstances, we still succeeded in improving our high level of delivery performance as shown by our OTD (on-timedelivery) statistics. We continued the deployment of our integrated flexile supply chain model to all sites.

LEM | Annual Report 2014/15

11

Responsibility
Our core values (page 14) have laid a strong foundation for our achievements. We have been embracing the ten principlesof the United Nations Global Compact (UNGC) since 2006. These principles, which relate to human rights, labor, environment and anticorruption, are embedded in every aspect of our Company, from our strategy to our recurring actions.
In the financial year 2014/15 we made major progress in terms of compliance by upgrading our Company principles into
a comprehensive LEM Code of Conduct, which goes far beyond the UNGC requirements. In particular, we increased ourcompliance to a culture in which misconduct is never acceptable. We show zero tolerance for corruption in all its forms,
including extortion and bribery. The Board of Directors and the CEO are personally and constantly committed to preventing any misconduct of our stakeholders. We trained our staff and received positive feedback as employees, in particular,
valued the enhanced feedback culture. 80% of our main business partners have already signed our Code of Conduct.
Our Internal Control System (ICS) contributes to the reliability of financial reporting, compliance with laws and regulations
and the effectiveness of operations, while also safeguarding LEM's assets. In the financial year 2014/15 we reinforced
our ICS by training our teams and enhancing internal controls; our new ERP system will allow to increase the efficiencyof these internal controls via a higher degree of automation.
Like every year, we renewed our ISO 9001, ISO 14 001 and ISO TS certifications for our production sites. We optimize
each new product family's ecological footprint and share this information in each product's environmental profile. We
have reached tangible results in terms of material consumption, packaging, and end-of-life recyclability.
Employee engagement
In 2014 we conducted a global survey to assess LEM's employee engagement for the Company, employee engagement
for the job and managerial effectiveness. 76% of employees participated. The study showed that, thanks to regular internal communications and training, employee engagement around the world has increased since the previous survey, which
was performed in 2012. Overall, job satisfaction has improved and employees were proud to work for LEM. According to
the employee assessment, LEM was even more customer-focused in 2014 and better met customers' needs than in 2012.
Also, LEM was more efficient and results driven. LEM's employees were confident about the future of the Company with
LEM's strategy perceived as a clear strength.
Customer satisfaction
In 2014 we also conducted a customer satisfaction survey which included customers from all territories. Our customers
rated the quality of our products highly, even higher than in our 2012 study. A look at the detailed findings reveals that ourcustomers have a very positive perception of LEM products in terms of reliability, quality, performance and innovation.
Many customers agree that our products have a positive impact on the value and performance of their own products. Our
customers confirmed that we have improved the quality of relations since 2012. Getting in touch with our team and how
the team understands customers' requests and expectations, both from a commercial and a technical perspective, wererated as a clear strength of LEM. Customers are more satisfied with processes and on-time delivery, they appreciate
working with us and rate us as a reliable business partner.
Outlook
Economic perspectives in Europe and North America seem to improve. Although the Chinese economic growth is poised
to slow, we do not expect negative effects on our markets. Due to these economic factors and the success of new products, we expect growth of volumes in both segments. Current price pressure, however, as well as foreign exchange effects
may affect our sales and margins in the financial year 2015/16. We expect the operating margin to be within our target
range of 15% to 20%.

LEM | Annual Report 2014/15

12Power generator
In remote areas, the use of power generator is needed to ensure continuity of power
supply. To avoid outages, power generators must know in real time their capacity
requirements.
The diesel-driven engine (1) activates an alternator (2), whichconverts mechanical energy into electricity. The electricity is conducted to the network and measured at the output of the alternator through the RT Rogowski coil (A) that is connected to theenergy meter (3). The energy meter transmits the information to
the central post analysis (4) which adapts the power generation
to demand.
To measure real-time electricity production, the use of RT
Rogowski coils offers considerable advantages for the energy
producer: the transducer installation on the generator does not
require any interruption of production, their size is minimal, andtheir robustness ensures high reliability and long-term service.

RT 2000

5
1

4

2

3

A
A

1
2
3
4
5

RT 2000
Motor
Alternator
Energy meter
Central post analysis
Grid

LEM | Annual Report 2014/15

13

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 us a team. They are the common beliefs we share. They are thespirit 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 with a "yes customer" attitude. All our activities are driven by thedesire to provide best quality service to our customers. We aim to listen to, anticipate and respond to our customers'
needs. For this reason, we collaborate closely with our customers and form true relationships. We target "customer
delight."
We operate with integrity
Basic ethical behavior and integrity in business relationships determine the essence of all our actions. As a Company andas individuals, we do the right things right and never compromise our values and principles. We honor our agreements
and are honest in our communications.
Our relationships with co-workers, customers, suppliers, partners and the investor community are based on openness
and fairness.
We value teamwork
LEM forms a worldwide community. Close collaboration and networking across functions, departments and cultures iscritical for the success of the Company. To cooperate, we need to be open and honest and willing to share and trust eachother. Accountability is a key factor to our success. We are committed to a workplace where individuals are treated fairly
and with respect, where all employees have the opportunity to expand their skill, and accomplishments are recognized.
Teamwork is more than just working together, it is bringing out the best of everyone's strengths.
We commit
We set our goals high because we know we can reach them. We honor these goals as promises to our customers, ourshareholders and ourselves. Our continued success depends on keeping our promises and taking responsibility for all
our actions. Success is measured by the results we produce 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 and results, 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 to be
the leaders in our industry and not the followers.

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Corporate Governance Report
The following information complies with the Corporate Governance Directive of the SIX Swiss Exchange (SIX) and the disclosurerules of the Swiss Code of Obligations. In order to enhance the clarity of this chapter, reference is made to other parts of theAnnual Report and our website (www.lem.com). Key elements are contained in the Articles of Incorporation.
1 Group structure and shareholders
Group structure
LEM Holding SA is domiciled at Avenue Beauregard 1, CH-1700 Fribourg. LEM's registered shares are listed on the main
segment of the SIX Swiss Exchange (LEHN, security no. 2 242 762; ISIN 0022427626). On 31 March 2015, the market
capitalization was CHF 910 million.
LEM Group is structured into the Industry Segment and the Automotive Segment. Appropriate segment reporting pursuant to IFRS is contained in note 3 to the consolidated financial statements. All companies in LEM Group are listed under"Scope of consolidation" in note 25 of the consolidated financial statements, with their respective Company names, registered offices, share capitals and the relevant percentages of shares held. There are no other listed companies in thescope of consolidation.
Significant shareholders
On 31 March 2015, the following shareholders held 3% or more of the share capital and voting rights:
In number of shares/options,per cent of shareholding

31.3.2015
Options
PositionIn %SharesWerner O. Weber and Ueli Wamp480'000 30'000
510'000
44.7%
fler, in Zollikon/Wollerau, Switzerland, through WEMACO Invest AG
and Swisa Holding AG, in Zug/
Cham, Switzerland
Ruth Wertheimer, in Kfar Shmaryahu,
141'581
N/N
141'581
12.4%
Israel, through 7-Industries Holding
B.V., in Amsterdam, Netherlands
Montanaro Asset Management Ltd,
74'834N/N
74'834
6.6%
in London, United Kingdom
Sarasin Investmentfonds AG,
59'813
N/N
59'813
5.2%
in Basel, Switzerland0
0.0%
Erwin Studer and Joraem de
30'000 (30'000)
Chavonay, in Zollikon/Zug,
Switzerland
Total shareholders < 3%353'772
N/N353'772
31.0%
Total
1'140'000
0 1'140'000 100.0%

403'500

Shares

31.3.2014
Options

PositionIn %100'000

503'500

44.2%

141'581

N/N

141'581

12.4%

85'608N/N

85'6087.5%

80'979N/N

80'9797.1%

94'000 (100'000)(6'000)(0.5%)

334'332
1'140'000

N/N
334'332 29.3%
0 1'140'000 100.0%

N/N = none notified

Mr. Werner O. Weber and Mr. Ueli Wampfler have notified the Company of the acquisition of 50'000 options from Erwin
Studer and Joraem de Chavonay on 27 June 2012 and of another 50'000 options from the same issuer on 27 November
2013. Both have exercised 50'000 options on 10 June 2014 and another 20'000 options on 23 December 2014. No othershareholder has notified any options to the Company.
The notifications which have been sent to the Company and the disclosure office of the SIX Swiss Exchange AG during thefinancial year pursuant to article 20 of the Federal Act on Stock Exchanges and Securities Trading and which have been published on the latter's electronic publication platform may be viewed via the search function on http://www.six-exchangeregulation.com/obligations/disclosure/major_shareholders_en.html.
Cross-shareholdings
LEM has no cross-shareholdings with other joint-stock companies.
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 paid-up
registered shares with a par value of CHF 0.50 each. There are no shares with preferred voting rights. All shareholders
are entitled to the same dividends.
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 2015, LEM Holding SA held 365 treasury shares.
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Authorized and conditional capital
There is no authorized or conditional capital, nor are there any profit-sharing certificates or participation in certificates orany convertible bonds outstanding.
3 The Board of Directors
Election, terms of office and cross-involvement
The Board of Directors is comprised of at least three members who are individually elected at the ordinary General Meetingof the Shareholders for a mandate of one year, which is renewable up to an age limit of 70. Except for the Chairman of theBoard of Directors and the members of the Compensation Committee who are elected by the ordinary General Meeting, theBoard constitutes itself.
At the ordinary General Meeting on 26 June 2014, Ilan Cohen, Norbert Hess, Andreas Hürlimann, Peter Rutishauser and Ueli
Wampfler were reelected as members of the Board of Directors. Andreas Hürlimann was elected as Chairman of the Board;Peter Rutishauser maintained the Vice Chairmanship. All members of the Board are nonexecutive and have at no time beenpart of the executive management of LEM.
Servotronix Motion Control Ltd, a company presided by Ilan Cohen, has bought transducers for CHF 609 thousand in 2014/15(CHF 163 thousand in 2013/14), including purchases done by its subsidiaries and subcontractors, from LEM Group at market
price. No other member of the Board of Directors has any significant business connection with LEM Group.
The Board of Directors was comprised of the following members as of 31 March 2015:
Andreas Hürlimann

Position Chairman of the Board of Directors, Chairman of the Strategy Committee, Member of the
Audit & Risk Committee

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 Sales and Marketing 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 ZürichDAS Finance, University of Zürich

Peter Rutishauser

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

Nationality Swiss

Entry 2003

Born in 1956

Professional background
Since 1989, Independent entrepreneur, member of the board and ­s hareholder of several mid-sizedcompanies
Other notable activities– –President of the Board of Directors, Equatis AG, Zürich
Education
Ph. D. sc. nat., ETH Zürich
M. A. HSG, University of St.Gallen

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

Ilan Cohen
Nationality Israeli

Entry 2010

Born in 1956

Professional background
Since 2010, President, Servotronix Motion System Ltd. and Servotronix Motion Control Ltd., Israel
2008 – 2009, General Manager, Kollmorgen Industrial & Commercial Engineered Solutions Ltd.
­( Danaher Group)
1997 – 2008, President and CEO, Kollmorgen Servotronix Ltd.
1987, Founder, Servotronix Ltd.
1983 – 1990, Associate professor, University of Tel Aviv, Israel
Other notable activities– –Board member, Servotronix Motion Control Ltd., 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

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Norbert Hess

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

Nationality German

Entry 2013

Born in 1960

Professional background
Since 2012, Member of the Management Board, EPCOS AG, Munich, Germany
2005 – 2012, Head of Ceramic Components Division, EPCOS OHG, Deutschlandsberg, Austria
1999 – 2005, Head of Surge Arresters Business Division, EPCOS AG, Berlin, Germany
1987 – 1999, Business, marketing and R&D roles at Siemens AG, Berlin/Erlangen, Germany
Other notable activities– –Member of the Management Board, EPCOS AG, Munich, Germany
Education
Ph.D., Technical University of Berlin, Germany
M. Sc. Mat. Eng., Technical University of Berlin, Germany

Ueli Wampfler

Position Member of the Board of Directors, Chairman of the Audit & Risk 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 (Swisa Group); Japako Management AG,
Japako Immobilien AG, Japako Plan AG, St. Gallen (Japako Group)– –Vice Chairman of the Board of Directors, Merbag Holding AG, Cham (Merbag Group)– –Member of the Board of Directors, Caspar Finanz AG, Zug (Traco Power Group); Offumo AG, Lupfig(Offumo Group); Rebew AG, Zürich; Otto Frey Beteiligungen AG, Lupfig
Education
M. A., University of Zürich
Certified auditor

External mandates
Pursuant to Article 31 of the Articles of Incorporation, members of the Board of Directors may not hold more than ten
additional mandates of which no more than four may be in listed companies. The following mandates are not subject tothe above limitations: (a) mandates in companies which are controlled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by it; and (c) up to six mandates in associations, charitableorganizations, foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme
governing body of a legal entity which is required to be registered in the commercial register or a corresponding foreign
register. Up to 20 mandates in different legal entities which are under joint control or same beneficial ownership are deemed
one mandate.
Internal organizational structure
The Board of Directors meets as often as necessary, but five to six annual meetings are planned in advance. In the completed financial year, six full-day meetings and one conference call were held. The meetings usually take place at theCompany's seat in Fribourg. The Chairman, after consultation with the CEO and the Chairmen of the committees, determines the agenda for the Board meetings. The members of the Board of Directors can ask for additional items to be
included on the agenda. The Board members receive supporting documents beforehand, allowing for a comprehensive
preparation of the meeting. As a rule the CEO attends the meetings of the Board of Directors without having a right tovote, and for most of the agenda items the CFO also attends. Depending on the topics, other members of Executive Management participate in the meetings in order to respond to 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 tie, the Chairman has thecasting vote. Minutes of the meetings including decisions taken are prepared by the outside Secretary of the Board anddistributed to the members of the Board, 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 a regular basis. Regular feedback sessions at the end of a meetingprovide valuable inputs for the continuous improvement of the Board's coherence and leadership.

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Definition of areas of responsibility
The Board of Directors delegates the Management of the Company 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 thefollowing 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;– – appointment/dismissal of the Executive Management;– – monitoring the ethical and legal behavior of LEM;
– – review of human resources management, including co-worker satisfaction and management development and legal,
intellectual property, social and environmental aspects.
Information and control systems of the Board of Directors vis-à-vis Management
The Board of Directors ensures that it receives sufficient information from the Management to perform its supervisory
duty and to make the necessary decisions.
The Board of Directors obtains the information required to perform its duties through several means:– – the Board of Directors receives monthly and quarterly reports on the current development of the business;– – informal meetings and teleconferences are held as required between the Chairman and the CEO as well as between the
Chairman and individual members of the Board;– – the Committees meet at regular intervals and exchange detailed information with the Management;– – the Board receives detailed information to each agenda item one week before the Board meeting;– – each Executive Manager joins at least one Board session in any given year.
Business risk management
In compliance with Swiss law, LEM is using a standardized procedure to analyze its business risks. LEM's risk management
covers all types of risk: financial, operational and strategic – including the external business environment, compliance andreputational aspects.
The Executive 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 first step, potential hazards are evaluated and a consensual list
with 10 to 15 main hazards is set up. In a second step, each hazard 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 manage the risks. The hazards thereafter are revalued a second time, taking into consideration the action
plan. In step four the action plan is validated and thereafter monitored on a monthly basis (step five).
Internal control system
In compliance with Swiss law, 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 and process owners have been identified. For each process, key risks that could lead to errors in the financial reporting have been
identified. For each key risk, key controls have been defined and responsibilities assigned to assure effective compliance anddocumentation of the key controls. The process has been presented to and approved by the Audit & Risk Committee.
Looking forward, the process owners will perform an annual process review whereby identified weaknesses shall be continuously improved and key risks and controls shall be updated. Based on the input of the process owners the CFO preparesan annual report on the internal control system which is presented to and discussed with the Audit & Risk Committee.

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Committees
Three standing committees support the Board of Directors. They are comprised of two nonexecutive members of theBoard of Directors. They meet whenever necessary but at least twice a year.
– – The primary objective of the Audit & Risk Committee (ARC) is to provide the Board of Directors with effective support
in financial 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 tothe shareholders. Furthermore, it reviews critical accounting policies, financial control mechanisms and compliancewith corresponding laws and regulations as well as the development and continuous improvement of the internal control system. If required, the external Group auditors are invited to participate at the meeting. The ARC prepares 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 membersof the Board of Directors and the Executive Management. It ensures and monitors the personnel development plan and adequate succession planning for the middle and top management. It supports the Board of Directors in establishing and reviewing the compensation strategy and guidelines and the performance objectives as well as in preparing the proposals to besubmitted to the General Meeting regarding the compensation of the Board of Directors and of the Executive Management. It
reviews and updates the compensation policy for the members of the Board of Directors and the Executive Management andthe performance-based compensation system for the Executive Management. The NCC prepares proposals to be decided by
the Board of Directors. In the completed financial year five half-day meetings and two telephone conferences were held.
– – The primary objective of the Strategy Committee (SC) is to assist the Board of Directors in fulfilling its duties with respect
to determining the Company's strategy and the appropriate means to pursue it, including LEM's organizational setup.
As strategic work and its successful implementation is based upon coordinated and interlocking activities between
management and the Board, the SC ensures close collaboration with the CEO and the Executive Management. The SC
prepares proposals to be decided by the Board of Directors. The Board of Directors may also decide to delegate members of the SC to assist in steering longer-term strategic initiatives by joining the project steering committee. In thecompleted financial year four half-day meetings and six telephone conferences were held.
4 Executive Management
The Executive Management was comprised of the following members as of 31 March 2015:
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, LausanneMBA, IMD, Lausanne

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
M. A. HSG, University of St.Gallen
CEMS Master in International Management, University of St.Gallen and HEC, Jouy-en-Josas, France

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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 ESIGELEC, Rouen, France

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, Germany

Jean-Marc Peccoux

Function Vice President, R&D and IP

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 and R&D Program Manager Valeo– –1991 – 1995, R&D Project Manager, Schlumberger– –1990 – 1991, Software Engineer, BEL Group
Education
Engineer, Arts & Métiers Paris Tech, France
Master of Economics Besançon University, France

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, Lausanne
Master in Logistics EPFL, LausanneOn 17 February 2015, the Company has published that the CFO Julius Renk has decided to leave the Company in thecourse of 2015. A successor has not yet been appointed as per 22 May 2015.
The company announced on 8 May 2015 that Luc Colombel has decided to leave LEM and that Rainer Bos has been
appointed as new VP Automotive, with effect as per 1 July 2015.
None of the members of the Executive Management have other activities in governing or supervisory bodies, any official
functions or political posts nor any permanent management functions for important Swiss and foreign interest groups.
External mandates
Pursuant to Article 31 of the Articles of Incorporation, and subject to approval by the Board of Directors, members of the
Executive Management may not hold more than three additional mandates of which no more than one may be in listedcompanies. The following mandates are not subject to the above limitations: (a) mandates in companies which are controlled by LEM or which control LEM; (b) up to five mandates held at the request of LEM or companies controlled by it;

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and (c), subject to approval by the Board of Directors, up to three mandates in associations, charitable organizations,foundations, trusts and employee welfare foundations. Mandates shall mean mandates in the supreme governing bodyof a legal entity which is required to be registered in the commercial register or a corresponding foreign register. Up to 20
mandates in different legal entities which are under joint control or same beneficial ownership are deemed one mandate.
Management contracts
There are no management contracts with companies or individuals outside LEM Group.
5 Compensation and shareholdings
Please refer to the section "Compensation Report" following on page 23.
6 Shareholders' participation rights
The rules on shareholders' participation rights are outlined in the Articles of Incorporation. The rules for the convening ofGeneral Meetings of the Shareholders, 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
page www.lem.com.
Voting rights and representation restrictions and inscription 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 registered by 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 independent representative or by a third party who need not be a shareholder
of LEM Holding SA.
Statutory quorums
The Articles of Incorporation contain no deviation from the applicable law. In case a second vote is necessary for elections,a relative instead of the absolute majority of the votes represented is required.
Convocation of the General Meeting of the Shareholders
Registered shareholders are convened to General Meetings by ordinary mail and by publication in the Swiss Official Gazetteof Commerce at least 20 days prior to the day of the meeting. Any shareholder who is registered as a shareholder, on the
day determined by the Board of Directors, has the right to attend and vote at the General Meeting.
According to Article 12 of the Articles of Incorporation and Article 699 paragraph 3 of the Swiss Code of Obligations, one
or several shareholders who collectively hold 10% of the share capital can call for a General Meeting and submit mattersto be placed on the agenda.
AgendaAccording to Article 12 of the Articles of Incorporation, one or several shareholders who collectively hold 10% of the sharecapital can call for a shareholders' meeting and submit matters to be placed on the agenda.
Dividend policy
LEM targets a payout ratio significantly above 50% of the consolidated net profit for the year, to be proposed by the Boardof Directors to the General Meeting of the Shareholders.
7 Change of control and defensive measures
Opting-out clause
In June 2010, the General Meeting of 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 of Incorporation of the Company. This clausereleases any shareholder from the obligation to submit a public takeover offer to all shareholders if his participation in LEM
exceeds 331/3 % of the voting rights. The Swiss Takeover Board has decided on 22 September 2011 that a passing of the331/3 % 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. No member of the Executive Management will receive additional severance payments if dismissed in the case of a change of control of the Company.

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8 Auditors
The duration of the auditors' mandate is one year. Ernst & Young have been auditing LEM since the financial year 2005/06,
with Arthur Bergmann bearing the responsibility for the audit since 2013/14.
Ernst & Young charged the following fees for professional services rendered for the 12-month period ending 31 March 2015:
Type of service
In CHF thousands

2014/15

Audit services
Tax services
Total

323
0
323

Evaluation and control of the auditors is done by the ARC which makes recommendations to the Board of Directors. In
particular, the ARC evaluates the performance, 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 ARC in the presence of the external auditors.
During 2014/15 Ernst & Young attended two regular ARC meetings.
9 Information policy
LEM informs its shareholders on the business status and its results on a quarterly basis. After the first six months, a halfyear report is published. This report, as well as the Annual Report, is made publicly available on its website www.lem.com
and may be obtained in print from the Company's headquarters. Once a year, LEM holds a presentation for the media andfinancial analysts. Internal processes assure that price-sensitive facts are published without delay in accordance with thead hoc publicity rules of the SIX Swiss Exchange.
At www.lem.com, detailed information is available, e.g., the Articles of Incorporation, interim and annual reports, investor
presentations, press releases as well as the financial calendar.
Contact for investors and media: Julius Renk, CFO, Chemin des Aulx 8, CH-1228 Plan-les-Ouates, or send an e-mail toinvestor@lem.com (phone: +41 22 706 12 50).

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Compensation Report
The future of LEM depends on our ability to attract, develop and retain talented people. Among the many measures we
use to achieve this ambition are competitive remuneration policies for our Executive Management. Our compensation
policies are based on results and performance and LEM's emphasis on creating value for its shareholders. To this end,
our compensation policies are designed to be aligned with shareholders' interest.
In brief:– – Core principles
	LEM's compensation policies are based on performance creating long-term value for shareholders. The compensation
policies are approved by the Board of Directors upon recommendation by the Nomination & Compensation Committee(NCC) and reviewed on an annual basis. All fixed and variable compensation is paid in cash.
– – Compensation of the Board of Directors
	The compensation of the Board of Directors consists exclusively 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 Board of Directors membership such as Committee activity.
– – Compensation of the Executive Management
	In order to encourage and reward results that contribute to the sustainable success of LEM, the total compensation of
the Executive Management consists of three elements: base salary, variable compensation and nonwage compensation. The target-setting process for the variable compensation is carried out on an annual basis and includes quantitative and qualitative performance criteria, such as financial results of LEM.
– – Changes to the compensation policies
	At the ordinary General Meeting of the Shareholders on 26 June 2014, the shareholders have amended the Articles of
Association in order to comply with the "Ordinance against Excessive Compensation in Public Corporations." LEM has
adjusted short-term and long-term variable compensation for Executive Management in this regard.
1 General Compensation Principles in the Articles of Association
LEM's Articles of Association provide for the following mechanism of approving the aggregate amounts of compensationof the Board of Directors and the Executive Management (Article 27):
"The General Meeting shall approve the proposals of the Board of Directors in relation to:
1. t he maximum aggregate amount of compensation of the Board of Directors for the following term of office;2. t he maximum aggregate amount of fixed compensation of the Executive Management for the period from October 1
to September 30 of the following year;
3. t he aggregate amount of short-term variable compensation elements of the Executive Management for the past financialyear;
4. t he maximum aggregate amount of long-term variable compensation elements of the Executive Management for thecurrent financial year.
The Board of Directors may submit for approval by the General Meeting deviating or additional proposals in relation to
the same or different periods.
In the event the General Meeting should not approve a proposal of the Board of Directors, the Board of Directors shalldetermine, taking into account all relevant factors, the respective (maximum) aggregate amount or (maximum) partial
amounts, and submit this or these amounts for approval by the same General Meeting, a subsequent extraordinary General Meeting or the next ordinary General Meeting.
The Company or companies controlled by it may pay or grant compensation prior to approval by the General Meeting
subject to subsequent approval by the General Meeting."
In case a person assumes an Executive Management function during a compensation period for which the General Meeting has already approved the compensation, Article 28 of the Articles of Association provides that LEM or companies
controlled by it shall be authorized to pay or grant to each such person a supplementary amount during the compensation period(s) already approved if the compensation already approved is not sufficient to cover his compensation. Per
each compensation period and member, the supplementary amount shall not exceed thirty-five per cent of the aggregate
amounts of compensation of the Executive Management last approved.
Article 29 of the Articles of Association provides for the following general principles for the compensation of the Board of
Directors and the Executive Management:"The compensation of the members of the Board of Directors shall consist of fixed compensation.
The compensation of the members of the Executive Management shall consist of a fixed and a variable part. The variable
compensation may comprise short-term and long-term variable compensation elements and shall take into account position and level of responsibility of the recipient.
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The short-term variable compensation elements shall be governed by performance objectives. These may take into
account individual targets, the performance of the Company, the group or parts thereof and/or targets in relation to themarket, other companies or comparable benchmarks; their achievement is generally measured during a one-year period.
The long-term variable compensation elements shall be governed by performance objectives. These may take into accountstrategic and/or financial targets; their achievement is generally measured during a perennial period.
The Board of Directors or, to the extent delegated to it by the Board of Directors, the Compensation Committee shalldetermine the relative weight of the performance objectives and the respective target values.
Compensation may be paid or granted in the form of cash, shares, in kind and/or in the form of other types of benefits;compensation of the Executive Management may also be paid or granted in the form of options, financial instruments orunits. The Board of Directors or, to the extent delegated to it by the Board of Directors, the Compensation Committee
shall determine grant, vesting, exercise and forfeiture conditions. They may in particular provide for continuation, acceleration or removal of vesting and exercise conditions, for payment or grant of compensation based upon assumed target
achievement, or for forfeiture of compensation, in each case in the event of predetermined events such as a change-ofcontrol or termination of an employment or mandate agreement.
Compensation may be paid or granted by the Company or companies controlled by it."
The Articles of Association do not contain a provision regarding loans, credits or pension benefits to members of theBoard of Directors and the Executive Management.
2 Board of Directors
2.1 General principles for compensation of nonexecutive Directors
The compensation for the Board of Directors is approved by the General Meeting of the Shareholders upon proposal by
the Board of Directors based upon recommendation by the NCC. The remuneration of the Board of Directors is a fixedcash payment and is reviewed on an annual basis. The remuneration compensates for the personal responsibility andexposure 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. Eachmember of the Board of Directors shall be a shareholder of LEM. The number of shares to be acquired on the market
within a period of three years after joining the Board of Directors shall reach a value of approximately three annual fixedcompensations. Trading with LEM shares has to respect LEM's disclosure and insider-trading policy.
2.2 Remuneration of nonexecutive Directors
The Board of Directors has decided to adopt a remuneration scheme with a fixed fee paid in cash in the amount of CHF
220'000 for the Chairman, CHF 130'000 for the Vice Chairman and CHF 80'000 for each member. Committee activity
will be compensated with CHF 40'000 for the Committee's chairman and with CHF 20'000 for its members.
2014/15
In CHF thousands

Annual salary

Additional fees

Total compensation

Company's
contribution to social
security charges

Andreas Hürlimann 1, 4, 7

280

0

280

18

Peter Rutishauser 2, 5, 8

190
100
100
120
790

0
0
0
0
0

190
100
100
120
790

17
0
0
8
42

Ilan Cohen 8
Norbert Hess 6
Ueli Wampfler 3
Total

The aggregate total amount of compensation of the Board of Directors in 2014/15 amounted to CHF 832 thousand.
2013/14
In CHF thousands

Andreas Hürlimann 1, 6, 7
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 4
Ueli Wampfler 3
Total
Chairman of the Board
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee

Annual salary

Additional fees

Total compensation

Company's
contribution to social
security charges

260
160
100
100
120
740

15
15
0
0
0
30

275
175
100
100
120
770

17
16
0
0
8
40

Member of the Audit & Risk Committee
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee

1

4

7

2

5

8

LEM | Annual Report 2014/15

24

Chairman of the Strategy Committee
Member of the Strategy CommitteeIn 2013/14, additional fees totaling CHF 30'000 were awarded to Andreas Hürlimann (CHF 15'000) and to Peter Rutishauser(CHF 15'000) for additional efforts of the NCC with regard to the implementation of the requirements of the "Ordinance against
Excessive Compensation in Public Corporations."
Compensation of former members and of related parties
In financial years 2014/15 and 2013/14, no compensation was paid to former members of the Board of Directors and to relatedparties.
2.3 Shareholdings of nonexecutive directors
31.3.2015

31.3.2014

Number ofshares held

Number ofoptions held

Board of Directors
Andreas Hürlimann

793

Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Total

2'606
170
0
55'00058'569In number of shares/options

Number ofshares held

Number ofoptions held

0

724

0

0
0
0
10'000
10'0002'606
140
030'50033'97000030'00030'000On 27.6.2012 and 27.11.2013, Ueli Wampfler has acquired 30'000 options on LEM shares via Swisa AG from the shareholder group Studer/Chavonay. He exercised 20'000 options on 10.6.2014.
3 Executive Management
3.1 General principles for compensation of Executive Management
Remunerations for the Executive Management are approved by the General Meeting upon recommendation by the
Board of Directors, with input from the Chairman of the Board, the CEO and the NCC. The remuneration of the Executive Management is reviewed on an annual basis.
The total compensation 2014/15 for the Executive Management consists of three elements:
1.	Base salary
2.	Variable compensation according to the LEM Incentive System (LIS)
LIS part 1: short-term variable compensation related to the individual's function and responsibility and obtained results
LIS part 2: long-term variable compensation to the sustainable financial performance of LEM Group
3.	Nonwage compensation
Total compensation shall be in line with the market for comparable industrial companies taking into account the various
remuneration levels in each different function. The ratios between salary, variable compensation and nonwage compensation shall reflect sectorial and functional market practice. Benchmarking is carried out periodically.
3.1.1 Base salary of Executive Management
Base salaries are fixed amounts of cash paid monthly.
3.1.2 Variable Compensation of Executive Management
The target-setting process for the LEM Incentive System (LIS) is part of the LEM performance management and is carriedout on an annual basis. All variable compensation payments are made in cash and after the finalization of the respective
year-end closing based on the annual accounts and the personal performance review. Objectives and performance evaluations are prepared by the Chairman of the Board of Directors for the CEO and by the NCC for the other members of the
Executive Management.

LEM | Annual Report 2014/15

25

LIS part 1: short-term variable compensation related to the individual's function and responsibility andobtained results
The maximum value of the annual short-term incentive related to LIS part 1 amounts to 60% of the base salary for theCEO, 30% for the CFO and 35% for the other members of the Executive Management.
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 the degree of achievement of set objectives has to be evaluated at theend of the period, a clear understanding of the metrics to be applied has to be established at the time of target setting
and kept constant for the whole period. For each criterion, the curve between minimum and maximum bonus level has
to be defined. Ambitious but achievable objectives shall be set as targets, at which 80% of the respective maximum
amount shall be attributed.
LIS part 2: long-term variable compensation related to the sustainable financial performance of LEM Group
The LIS part 2 is an annual long-term incentive which is based on the performance of LEM evaluated over a period of
three consecutive years. The performance criterion is the cumulated economic value added (EVA) achieved over thesethree financial years. The definition of the EVA objective takes place at the beginning of year one and the evaluation of
the performance at the end of year three. Once the forward-looking EVA objective is defined, the EVA objective remains
unchanged over the period of three years.
For the LIS part 2 cycle ending 2014/15, the maximum value of the annual long-term variable compensation related to
LIS part 2 amounts to 40% of the base salary for the CEO, 20% for the CFO and 25% for the other members of the
Executive Management. In financial year 2014/15, the calculation for the LIS part 2 shows that the maximum amountwill be attributed.
For the LIS part 2 cycle ending 2015/16, the maximum value of the annual long-term variable compensation related to
LIS part 2 amounts to 48% of the base salary for the CEO, 24% for the CFO and 30% for the other members of the
Executive Management.
3.1.3 Nonwage compensation of Executive Management
For Executive Management, nonwage compensation includes pension plans (retirement benefits) only. LEM has a policy tolimit 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.
Executive Management benefits from the Swiss pension plan, a defined contribution plan that provides retirement benefits
and risk insurance for death and disability. Under IFRS, this plan is considered as a defined benefit plan. The insured compensation includes base salary only, is based upon LPP Swiss law and without limitation on the amount. The pension fundis funded by contributions from the Company and the insured employees. The average contribution ratio is 43% by the
Executive and 57% by the Company. As of 1 January 2015, two additional pension plans allow the Executive to increase theemployee contribution to pension, while maintaining company contribution constant.

LEM | Annual Report 2014/15

26

3.2 Remuneration of Executive Management
2014/15

In CHF thousands

François Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management

Base salary

LIS 1
short-term
variablecompensation

LIS 2
long-term
variablecompensation

Company's
contribution topension fundTotal­c ompen­s ation

Company's
contribution tosocial security
charges

480
1'406

245
386

192
298

61
129

977
2'219

78
174

1'886

631

490

190

3'196

252

Base salary

LIS 1
short-term
variablecompensation

LIS 2
long-term
variablecompensation

Company's
contribution topension fundTotal­c ompen­s ation

Company's
contribution tosocial security
charges

480
1'259

231
379

169
275

50
111

930
2'024

67
154

1'740

610

444

161

2'954

222

2013/14

In CHF thousands

François Gabella, CEO
Executive Management(excl. CEO)
Total Executive
Management

The amounts are shown as follows:– – Base salary: as paid out in the reporting period– – LIS 1 and 2 2014/15: as proposed to the ordinary General Meeting in June 2015 for payout in July 2015
– – LIS 2 2014/15: as accrued for in the reporting period for payout in July 2015
– – LIS 1 and 2 2013/14: as paid out in June 2014
– – Pension fund contribution and company contribution to social security charges: as paid out or accrued for in thereporting period
Compensation of former members and related parties
In financial years 2014/15 and 2013/14, no compensation was paid to former members of the Executive Management andto related parties.
3.3 Shareholdings of Executive Management
Executive Management
In number of shares/options

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

31.3.2015

31.3.2014

Number ofshares held

Number ofoptions
heldNumber ofshares held

Number ofoptions
held

400
0
2'100
1'265
1'500
1'100
6'365

0
0
0
0
0
0
0

150
140
2'100
1'265
1'500
1'100
6'255

0
0
0
0
0
0
0

4 Loans to current and former members of the Board of Directors and Executive Management and related parties
In financial years 2014/15 and 2013/14, no loans were granted or outstanding to current or former members of the Boardof Directors and Executive Management and to related parties.

LEM | Annual Report 2014/15

27

Auditor's Report
Report of the statutory auditor on the remuneration report
We have audited the remuneration report on parts 2.2 to 2.3 (pages 24 to 25), parts 3.2 to 3.3 and part 4 (page 27) dated
12 May 2015 of LEM Holding SA for the year ended 31 March 2015.
Responsibility of the Board of Directors
The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report inaccordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies(Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual
remuneration packages.
Auditor's responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law andarticles 14–16 of the Ordinance.
An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration reportwith regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures
selected depend on the auditor's judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods
applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
OpinionIn our opinion, the remuneration report for the year ended 31 March 2015 of LEM Holding SA complies with Swiss law
and articles 14–16 of the Ordinance.
Lancy, 26 May 2015
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2014/15

Karine Badertscher Chamoso
Licensed audit expert

28Super charger station for electric vehicle
As plug-in hybrid and electric vehicle
ownership is expanding, there is a growing
need for publicly accessible charging
stations, some of which support fastercharging at higher voltages and currents
than residential charging stations. The
challenge is to provide fast charging
without stressing the energy supply grid.
A super charger (1) operates using several 400V DC chargers
in parallel. This allows to re-charge a high-end electric car in
40 minutes to 80% load. If 10 cars are charged simultaneously,
1MW would be required from the grid (5). Charging stations
therefore include a photovoltaic plant with solar panels (2) on
the sunshade roof and a battery storage system (4). The
stored energy is used to reduce the energy peaks and to best
use the photovoltaic energy.

HO 250-P

LEM's transducers are used along the entire energy chain. The
chargers use the HO 250-P (A) to measure the DC current
while the photovoltaic inverter (3) uses up to 7 transducers,
such as CASRs, HLSRs and CTSRs to measure DC, AC andresidual currents.

A
1

2
3

A
A

4

A
1
2
3
4
5

HO 250-P
Super charger
Solar panels
Photovoltaic inverters
Battery storage
Grid

A

5

LEM | Annual Report 2014/15

29

Financial Review
Highlights– – At CHF 43.1 million, LEM shows the second-best net profit of its history (16.7% of sales)– – High operational profitability maintained at 21.0% on 257.8 million sales– – Low tax rate of 16.3%, due to one-off effects on the China withholding tax rate
– – Net working capital reduced by 2.1%, to CHF 37.9 million– – The decrease of the discount rate following the low-interest policy of the Swiss National Bank caused a CHF 6.5 million
reduction in the pension's funded status, through equity– – Strong free cash flow of CHF 40.5 million– – Proposed dividend payout of CHF 45.6 million (CHF 40 per share, unchanged), corresponding to 105.7% of the net
profit for 2014/15

In CHF thousands, %2010/112011/12*2012/13**2013/142014/15

Sales
Sales growth LEM Group
Sales growth Industry
Sales growth Automotive

296'203
59.7%
59.7%
59.8%

236'334(20.2%)(23.6%)
19.1%

234'953(0.6%)(4.0%)
24.8%

245'638
4.5%
5.5%(1.2%)

257'757
4.9%
4.7%
6.2%

Gross margin
Gross margin in % of sales

126'299
42.6%

92'29939.1%

98'55741.9%

115'371
47.0%

118'392
45.9%

Sales, General and Administration expense
SG&A in % of sales(51'855)(17.5%)(44'716)(18.9%)(43'008)(18.3%)(45'202)(18.4%)(48'845)(19.0%)

R&D expense
R&D in % of sales(14'031)(4.7%)(13'412)(5.7%)(14'722)(6.3%)(14'441)(5.9%)(15'337)(6.0%)

Operational EBIT
Operational EBIT growth
Operational EBIT in % of sales
Operational EBIT as % of sales Industry
Operational EBIT as % of sales Automotive

60'413134.1%
20.4%
21.1%
12.0%

34'171(43.4%)
14.5%
14.3%
15.4%

40'828
19.5%
17.4%
18.2%
12.6%

55'728
36.5%
22.7%
24.1%
14.0%

54'209(2.7%)
21.0%
22.6%
11.8%

Additional stock option plan costs/income(5'426)

315

0

0

0

EBIT
Financial result
Income tax
Effective tax rate

54'987(4'622)(10'722)(21.3%)

34'486(1'962)(4'037)(12.4%)

40'828(1'514)(6'914)(17.6%)

55'728(1'379)(8'709)(16.0%)

54'209(2'674)(8'404)(16.3%)Net profit for the year
Net profit growth
Net profit in % of sales

39'643276.4%
13.4%

28'487(28.1%)
12.1%

32'40013.7%
13.8%

45'641
40.9%
18.6%

43'131(5.5%)
16.7%*	Restatement after changes in classifications from 2011/12 on. The 2011/12 restatement lowered gross margin as percentage of sales by 1.8%pt,
decreased SG&A as percentage of sales by 2.0%pt and increased R&D as percentage of sales by 0.2%pt.
**	Restatement following IAS19R application (pensions).

Sales
LEM's sales increased by 4.9% to CHF 257.8 million in financial year 2014/15. At constant exchange rates, sales increased
by 6.7%. The unfavorable currency impact stems from the depreciation mostly of the euro, but also of the Japanese yen
and the Russian ruble. The U.S. dollar and the Chinese yuan have slightly appreciated against the Swiss franc, on a yearly
average.
Operational profitability
The gross margin decreased 1.1 percentage points to 45.9%, mainly due to foreign exchange impacts and competitive
pressure on prices.
Operating expenses have been increased by CHF 4.5 million, mainly linked to IT, strategy consulting, the continued buildup of LEM Bulgaria, to increased Research & Development spend and to a positive one-off effect on pension revaluationof CHF 1.2 million in 2013/14.

LEM | Annual Report 2014/15

30

Net sales

Gross margin

300

130

275

120

250

110

225

100

200

90

In CHF millions% of sales

50%

44%

41%

40

75

20

25

10

38%

0

0

10/11

11/12

12/13

13/14

14/15

9%
8%

12

7%
6%

9

6

0%

0
12/13

13/14

In CHF millions

35%% of sales

20%
18%

35
30
25
20

10
5
0
12/13

13/14

14/15

60

30%

12/13

13/14

% of sales

35%

30%

45
25%

40

25%

40
35

20%

20%

30
25

25

15%

20

15%

20
15

15
10%

10

10%

10
5

5
5%

0
11/12

12/13

13/14

5%

0
10/11

14/15

11/12

12/13

13/14

Net financial assets

Equity and equity ratio

40

100

25

60

12%

20

50

4%

0

60%

70

50%
40%

40

15

5

70%

80

14%

10

80%

% of assets

90

30

6%

14/15

In CHF millions

35

8%

14/15

50

16%

10%

15

15%
11/12

55

In CHF millions

40

0

In CHF millions% of sales

10/11

Net earnings

20%

10

EBIT

45

14/15

25%

10/11

50

30

30

14/15

55

35

1%

11/12

13/14

60

4%

2%

3

65

5%

3%

10/11

12/13

In CHF millions% of sales

11/12

11/12

Operational EBIT

In CHF millions

10/11

35%
10/11

R&D expenses

30%

40

20

30

50

35%

50

50

100

40%

% of sales

60

60

125

70

47%

70

150

45

In CHF millions

80

175

15

Operating expenses (incl. R&D exp.)

In CHF millions

30%

30

20%

20

10%

10

0%

0
10/11

11/12

12/13

13/14

14/15

10/11

11/12

12/13

13/14

14/15

LEM | Annual Report 2014/15

31

The 2014/15 EBIT margin remained high at 21.0%. We achieved this result thanks to a strong market position, continued
operational excellence and low-cost manufacturing and despite negative currency impacts.
Taxes
In the perspective of the new Chinese-Swiss double taxation agreement, LEM had taken the decision to delay the payment of dividends from its Chinese subsidiary. The agreement entered into force as per 15 November 2014, reducing thewithholding rate on dividends from 10% to 5%. This generated most of the 2.1% one-off tax savings in the reporting period
and was also the main driver for the decrease in LEM's expected tax rate from 18.8% to 18.4%. As a result, LEM maintained a low 16.3% tax rate for the financial year 2014/15.
Net profit for the year
Net profit for the year was CHF 43.1 million, 5.5% lower than last year, and represented 16.7% of sales. It ranks secondhighest in LEM's history.

In CHF thousands, %31.3.2011

31.3.2012*

31.3.2013**

31.3.201431.3.2015

Balance sheet analysis
Net working capital
Fixed assets
Noncurrent liabilities
Net operating assets
Net cash/(debt)
EquityEquity ratio
DSO – Days of Sales Outstanding
DIO – Days of Inventory Outstanding
DPO – Days of Payables Outstanding

39'39137'508(6'599)70'30026'61396'913
59.8%
66
73
59

29'07337'683(5'316)61'440
18'12179'561
60.0%
58
67
41

23'18336'771(3'534)56'42027'62984'049
61.9%
60
63
41

38'70737'803(6'887)
69'622
24'581
94'203
65.1%
65
80
49

37'88739'913(6'777)71'02320'92091'943
65.0%
66
72
28

*	Restatement after changes in classifications from 2011/12 on**	Restatement following IAS 19R application (pensions).

Balance sheet
In financial year 2014/15, LEM has reduced its net working capital by CHF 0.8 million to CHF 37.9 million. In anticipationof the go-live of the new Enterprise Resource Planning (ERP) software in April 2015, LEM proceeded to an early paymentof its suppliers per end of March 2015. This temporary negative impact has been more than compensated by higher tax
payables and use of a pension prepayment.
As a consequence of the low-interest policy of the Swiss National Bank, the discount rate used for the evaluation of LEM's
pension obligations has been reduced from 2.0% to 0.9%, thereby increasing the obligations by CHF 11.9 million. The
plan assets showed a solid investment performance and increased by CHF 5.4 million. As a result, the overall funded
status reduced by CHF 6.5 million, from a CHF 4.4 million asset to a CHF 2.1 million liability. In application of IAS 19, thisadjustment was accounted for in other comprehensive income and did not impact the net profit for the year.
Net financial assets (cash minus financial liabilities) decreased from CHF 24.6 million to CHF 20.9 million. On 31 March
2015, LEM had no interest-bearing financial liabilities.
The balance sheet showed a strong equity ratio of 65.0% (prior year 65.1%).
Cash flow
Free cash flow of CHF 40.5 million significantly increased compared to prior year (CHF 31.9 million), given lower tax payouts compared to last year.
Dividend
The proposed dividend of CHF 40 per share compares to CHF 37.86 earnings per share of and represents a payout ratioof 105.7%. The dividend proposal is unchanged from last year and underpins the Board of Directors' confidence in LEM's
financial outlook.

LEM | Annual Report 2014/15

32

LEM Group
Consolidated Financial Statements

Consolidated Statement of Financial Position . . . . . . . . 35
Consolidated Income Statement. . . . . . . . . . . . . . . . . . . . . 36

Consolidated Statement of Comprehensive Income . .

37

Consolidated Statement of Changes in Equity . . . . . . . .

37

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . 38
Notes to the Consolidated Financial Statements. . . . 39

Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

LEM | Annual Report 2014/15

33

LEM | Annual Report 2014/15

34

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
Noncurrent assets
Deferred tax assets
Property, plant and equipment
Intangible assets
Other noncurrent assets
Total noncurrent assets

Notes

31.3.2015

31.3.2014

20'92050'126
27'545
771
2'338
101'700

24'581
48'29028'495802
4'704
106'872

4'418
25'728
8'878
889
39'913

4'103
25'180
5'755
2'765
37'803

141'613

144'675

Notes

31.3.2015

31.3.201410

12'012
18'688
10'225
1'501
466
42'892

19'483
16'133
6'579
1'070
319
43'584

1'854
2'259
2'665
6'777

2'886
3'607
394
6'887

49'67050'471570(283)
12'55279'10591'943

570
(745)
9'298
85'081
94'203

141'613

144'675

4
5
6

18
7
8
9,21

Total assets
Liabilities and equity
In CHF thousands

Current liabilities
Accounts payable
Accrued expenses
Income tax payable
Current provisions
Other current liabilities
Total current liabilities
Noncurrent liabilities
Noncurrent provisions
Deferred tax liabilities
Other noncurrent liabilities
Total noncurrent liabilities

11
12

11
18
12, 21

Total liabilities
EquityShare capital
Treasury shares
Reserves
Retained earnings
Total equity
Total liabilities and equity

13
13
13

LEM | Annual Report 2014/15

35

Consolidated Income Statement
April to March
In CHF thousands

Notes

2014/15257'757

245'638

Cost of goods sold
Gross margin

14(139'366)
118'392(130'267)
115'371

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

14
14
14

(25'156)(24'075)(15'337)(1)
386
54'209(24'526)(20'881)(14'441)(64)
270
55'728Financial expense
Financial income
Exchange effect

15
16
17

(251)
199
(2'622)(121)
133(1'390)51'53554'350(8'404)(8'709)43'13145'641

37.86

40.09

Sales

Profit before taxes
Income taxes

18

Net profit for the year
Earnings per share, in CHF
Basic & diluted earnings per share

19

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

LEM | Annual Report 2014/15

36

2013/14

Consolidated Statement of­Comprehensive Income
April to March
In CHF thousands

Notes

Net profit for the period recognized in the income statement
Other comprehensive income to be reclassified to profit andloss in subsequent periods
Currency translation difference
Total other comprehensive income to be reclassified to
profit and loss in subsequent periods
Other comprehensive income not to be reclassified to
profit and loss in subsequent periods
Remeasurement gains/(losses) on defined benefit plans
Income tax
Total other comprehensive income not to be reclassified to
profit and loss in subsequent periods

21
18

Other comprehensive income/(loss) for the period, net of tax
Total comprehensive income for the period

2014/15

2013/14

43'13145'641

3'716
3'716

(2'933)(2'933)(5'096)
1'092(4'004)

1'886
(421)
1'465

(288)

(1'468)42'84344'173

Consolidated Statement of
Changes in Equity
Attributable to shareholders
In CHF thousands

1 April 2013*
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2014 / 1 April 2014
Net profit of the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends paid
Movement in treasury shares
31 March 2015

Notes

Share
­c apital

TreasurysharesCapitalreserve

Translation
reserve

570

(765)

12'708(457)

13, 21(2'933)(2'933)

13
570

19
(745)

(19)
12'68813, 21(3'390)
3'716
3'716

13
13
570

462
(283)

(462)
12'226326

Retainedearnings

Total
equity71'993 84'049
45'641 45'641
1'465(1'468)47'10644'173(34'157) (34'157)
138
138
85'081 94'203
43'131 43'131(4'004)(288)
39'127 42'843(45'568) (45'568)
465
465
79'105 91'943* Restatement following IAS 19R application (pensions)

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 2014/15

37

Consolidated Cash Flow Statement
April to March
In CHF thousands

Notes

2014/15

2013/1451'53554'350

90
134
7'291
47
7
1'420
56
(146)
(5'199)55'236
1'673
348(7'026)(5'005)50'23214(1'591)
7'523
220
179
287
30
(44)
(11'684)
49'283(5'264)(8'156)
4'733(8'687)
40'5967
8(6'151)(3'969)394(9'727)(7'275)(1'538)77(8'735)13
13

465(45'568)(45'103)138(34'157)(34'019)

Change in cash and cash equivalents(4'598)(2'158)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

24'581937
20'92027'629(890)
24'581

Cash flow from operating activities
Profit before taxes
Adjustment for noncash items and taxes paid
– – Net financial result– – Derivative financial instruments revaluation– – Depreciation and amortization– – Gain/loss on disposal of fixed assets– – Increase (+)/decrease (-) of provisions and allowances– – Movement in pension
Interest received
Interest paid
Taxes paid
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
Cash flow from investing activities
Investment in fixed assets
Investment in intangible assets
Increase (-)/decrease (+) in other assets
Cash flow from investing activities
Cash flow from financing activities
Treasury shares acquired (-)/divested (+)
Dividends paid to the shareholders of LEM Holding SA
Cash flow from financing activities

LEM | Annual Report 2014/15

38

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 electrical parameters.
Its core products – current and voltage transducers – are used in a broad range of applications in drives & welding,renewable energies and power supplies, traction, high-precision, conventional and green cars businesses. The Grouphas operations in thirteen countries and employs 1'274 people per 31 March 2015. 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 at Avenue Beauregard 1, CH-1700 Fribourg. The
Company has been listed on the SIX Swiss Exchange since 1986.
The Board of Directors approved the consolidated financial statements on 12 May 2015, to be submitted for approval by
the ordinary General Meeting of the Shareholders on 25 June 2015.
2 Significant accounting principles
2.1 Basis of preparation
The consolidated financial statements of LEM Group have been 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 prepared using the historical cost convention except that, as discussed
in the accounting policies below, certain items like derivatives are recorded at fair value.
The financial information is presented in thousands of CHF. The totals are calculated with the original unit amounts, which
could lead to rounding differences. These differences in thousands of units are not changed in order to keep the accuracyof the original data.
2.2 Adoption of new and revised International Financial Reporting Standards and Interpretations
New standards in 2014/15
In 2014/15, LEM Group introduced the following revised standards and interpretations:Standard or­i nterpretation

IFRS 10, IFRS 12
and IAS 27
IAS 32
IAS 39IFRIC 21

Title

Effective date

ImpactInvestment Entities – Amendments to IFRS 10, IFRS 12
and IAS 27
Offsetting Financial Assets and Financial Liabilities –Amendments to IAS 32
Novation of Derivatives and Continuation of Hedge
Accounting – Amendments to IAS 39
Levies

1 January 2014

N/A

1 January 2014

N/A

1 January 2014

N/A

1 January 2014

Immaterial

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

Amendments
Amendments
IAS 19IFRS 10 and IAS 28
IFRS 10, IFRS 12
and IAS 28
IFRS 11IFRS 14
IAS 1
IAS 16 and IAS 38
IAS 16 and IAS 41
IAS 27
Amendments
IFRS 15IFRS 9Title

Effective date

Annual Improvements to IFRS – 2011– 2013 Cycle
Annual Improvements to IFRS – 2010 – 2012 Cycle
Defined Benefit Plans: Employee Contributions
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture Amendments to IFRS 10 and IAS 28
Investment Entities: Applying the Consolidation Exception Amendments to
IFRS 10, IFRS 12 and IAS 28
Accounting for Acquisitions of Interests in Joint Operations Amendments to
IFRS 11
Regulatory Deferral Accounts
Disclosure Initiative Amendments to IAS 1
Clarification of Acceptable Methods of Depreciation and Amortization
Amendments to IAS 16 and IAS 38
Agriculture Bearer Plants Amendments to IAS 16 and IAS 41
Equity Method in Separate Financial Statements Amendments to IAS 27
Annual Improvements to IFRS 2012 – 2014
Revenue from Contracts with Customers
Financial Instruments

1 July 2014
1 July 2014
1 July 2014
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2017
1 January 2018

LEM | Annual Report 2014/15

39

The Group will implement the relevant new standards when they become effective, i.e., for annual periods beginning on orafter the effective date stated above. The impact from applying above standards and interpretations has not been evaluatedbut is expected to have no material effects on the capital, financial position, income or cash flow situation of LEM.
2.3 Summary of critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the reported amounts of revenues, expenses, assets, liabilities and related disclosures at the date of the financial statements. These estimates are based on management's best knowledge of current events and actions that the Groupmay 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 and property, 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 are tested for impairment if there is a triggering event indicating a potential impairment. These calculations require the use of estimates in particular to the expected growth of sales, discount rates anddevelopment 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 their amount can be estimated reliably. Nevertheless, provisions are basedon assumptions.
Income and other taxes
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. Some of these positions
are inherently uncertain and include those relating to transfer pricing matters and the interpretation of income tax laws
applied to complex transactions. The Group periodically reassesses its tax positions. Changes to the financial statement
recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes
in the facts, circumstances, information available and applicable tax laws.
Employee benefits
The standard requires that certain assumptions are made in order to determine the amount to be recorded for retirement
benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial assumptions
such as expected salary increase, employee turnover and discount rates. Substantial changes in the assumed development of any of these variables may significantly change LEM Group's retirement benefit obligation and pension plan assets.
Valuation of deferred tax assets
The carrying amount of deferred tax assets is reviewed on each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available 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 are those entities over whose the Group has the control. Control is when the Group is exposed, or has rights,
to variable returns from its involvement with subsidiary and has the ability to affect those returns through its power overthe subsidiary to direct the relevant activities.
Business combinations are accounted for using the acquisition method. Companies that are acquired or sold during thefinancial year are included in the Group financial statements up to the date of 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 entered into, or acquired, on the date of purchase. Identifiable acquired assets, liabilities and contingent liabilities
are recognized at their fair value as of the date of their acquisition. The Group's share of the purchase price that exceeds
the fair value of the identifiable net assets is recognized as goodwill. The Group's share of the fair value of the identifiable
net assets that exceeds the purchase price is shown as gain on bargain purchase on the income statement.
Intragroup assets and liabilities as well as income and expenses are set off against each other.
Also intragroup unrealized profits on inventories and fixed assets are eliminated.

LEM | Annual Report 2014/15

40

Associates
Investments in associated undertakings are accounted for using 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 2015 and 31 March 2014.
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 the currency 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 other comprehensive income. When a company is sold, the cumulative translation differences recognized in other comprehensive
income are transferred to the income statement.
The following table summarizes the principal exchange rates that have been used in the translation process.
Currency

Income statement of
2014/15
Average rate in CHF

Income statement of
2013/14
Average rate in CHF

Balance sheet
31.3.2015
Year-end rate in CHF

Balance sheet
31.3.2014
Year-end rate in CHF

BGN
CNY
DKK
EUR
GBP
JPY
RUB
USD

0.603
0.151
0.158
1.180
1.499
0.0085
0.022
0.930

0.629
0.149
0.165
1.230
1.458
0.0092
0.028
0.918

0.535
0.158
0.140
1.046
1.437
0.0081
0.017
0.971

0.623
0.143
0.163
1.219
1.474
0.00860.025
0.885

Foreign currency transactions
Foreign currency transactions are translated at the market rate prevailing at that time. The monetary assets and liabilities
are translated at the year-end rates while nonmonetary assets are translated at historical rates. Gains and losses arisingfrom the transactions as well as from the translation of monetary assets and liabilities in foreign currencies are recorded
as income or expenses in the income statement (except from translation differences arising from a monetary item that
forms part of the Group's net investment in a foreign operation, which are included in shareholders' equity).
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, cash at bank and cash at postal accounts and bank deposits withan original maturity of three months or less from the date of acquisition, that are readily convertible to known amounts ofcash.
2.7 Inventories
Inventories are stated at the lower of cost or net realizable value. The first-in, first-out (FIFO) method is applied. The costof finished goods and work in process comprise raw materials, direct labor costs and other costs that can be directly
allocated, such as production overhead expenditures. Financing costs are not included in inventories. Allowances are
established when:– – there is an objective indication that the Group will not be able to sell the goods in due time;– – the goods are damaged, in excess or obsolete;– – the net realizable value is below cost.

LEM | Annual Report 2014/15

41

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 property, plant and equipment is capitalized only when it is probable that future economic benefits associated with
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 at the date of acquisition. Goodwill on acquisitions is reported in the balance sheet as an intangible asset and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Research & development
Research costs are written off as incurred. An intangible asset arising from development should be recognized if, and only
if the Group can demonstrate the following:– – the technical feasibility of completing the intangible asset;– – Group intention to complete the intangible asset;– – ability to use or sell the intangible asset, the intangible asset will generate probable future economic benefits;– – the availability of adequate technical, financial and other resources to complete the development; and– – ability to measure the expenditure attributable to the intangible asset during its development reliably.
Such development costs are capitalized and written off over the life of the product or process.
Other intangible assets
Other intangible assets with definite useful lives are carried at cost less amortization and any impairment.
Expenditure on computer software, acquired patents, trademarks and licenses is capitalized and amortized using thestraight-line method over their useful lives, not exceeding five years.
2.10 Impairment of tangible fixed assets and ­i ntangible assets
Assets that are subject to depreciation and amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amountby which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's
fair value less cost to sell and value in use.
For the purpose of assessing impairment, assets are grouped 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) and when circumstances indicate that the carrying value may be
impaired. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Impairment losses relating to goodwill cannot be reversed in future years.
2.11 Financial assets
Financial assets comprise cash, receivables, accrued income, marketable securities and derivative financial instruments.
Initial recognition and measurement
At initial recognition, financial assets are designated into two categories, financial assets at fair value through profit andloss and loans and receivables.
Financial assets are initially recognized at fair value plus, in the case of a financial asset not at fair value through profit
and loss, directly attributable transaction costs.

LEM | Annual Report 2014/15

42

Subsequent measurement
The subsequent measurement of financial assets depends on their classification:– – financial assets at fair value through profit and loss (refer to note 2.12);– – loans and receivables which are nonderivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and receivables are subsequently measured at amortized cost using the effective interest
rate method, less impairment.
Accounts receivable are carried at original invoice amount less 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 is anobjective indication that the Group will not be able to collect the amounts due. Allowances for doubtful accounts are written off when identified.
Other receivables are measured at amortized cost. The Group assesses at each reporting date whether there is any objective evidence that an asset or group of assets is impaired. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant difficulties, default or delinquency in interest or principal payments.
The amount of the loss is measured as the difference between the assets' carrying amount and the present value of estimated future cash flows.
2.12 Derivative financial instruments
The Group uses derivative financial instruments to hedge foreign exchange risks of forecasted transactions. Derivative
financial instruments can comprise forward exchange contracts and option-based structures.
Derivative financial instruments are initially measured at fair value and subsequently at fair value through profit and loss.
Any gains and losses arising from changes in fair value on derivatives are taken directly to the income statement whichmeans that the Group does not apply hedge accounting.
Derivative financial instruments are shown as part of other current assets and other current liabilities. In case the maturity
is more than one year, derivative financial instruments are recognized under other noncurrent assets or other noncurrent
liabilities.
2.13 Financial liabilities
Financial liabilities comprise bank loans, payables, accrued expenses and derivative financial instruments at the end of
the period.
All financial liabilities are recognized initially at fair value and, in the case of loans and payables, net of directly attributabletransaction costs.
Financial liabilities that are due within 12 months after the balance 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.
2.14 Leases
In the years under review LEM Group does not hold any finance lease.
Rentals payable under operating leases are charged to the income statement on a straight line basis over the lease term.
2.15 Employee benefits
The Swiss subsidiaries provide a defined benefit plan for employees; the other subsidiaries provide defined contributionplans. In both cases the charges are included in the related periods in the personnel expenses of the various functions
where the employees are located.
Defined benefit plan
The defined benefit obligation is determined annually by a qualified independent actuary. The obligation and costs of pension benefits are determined using the projected unit credit method. Service costs are part of personnel expenses andconsist of current service costs, past service costs and gains/losses from plan settlements. Past service costs are recognized at the earlier of the date when the plan amendment occurs, or when restructuring costs are recognized. They
include plan amendment and curtailment. Gains or losses on settlement of pension benefits are recognized when thesettlement occurs. Net interest is recorded in the financial result and is determined by applying the discount rate to thenet defined benefit liability/asset that exists at the beginning of the year. Actuarial gains and losses resulting from changes
in actuarial assumptions and experience adjustments are recorded in other comprehensive income as remeasurementsof employee benefits. The return on plan assets (excluding interest based on the discount rate) and any change in theeffect of an asset ceiling are also recorded in this line. In accordance with IFRIC 14, any assets resulting from surpluses
in defined benefit plans are limited to the value of the maximum future savings from reduced contributions.
LEM | Annual Report 2014/15

43

Defined contribution plan
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
LEM Incentive System
The LEM Incentive System (LIS) consists of a part 1, which is related to the individual's and LEM Group annual performance, and a part 2, which is related to the long-term performance of LEM Group. The LIS part 2 is an annual bonus
which is based on the Economic Value Added (EVA) performance of LEM evaluated over the three previous fiscal years.
Both elements are cash settled and the bonus payments are made in the first quarter of the following fiscal year. The estimated payments are accrued for per year-end.
2.16 Provisions and contingent liabilities
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it isprobable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of theamount of the obligation.
Warranty and customer claims
The Group recognizes the estimated liability to replace products still under warranty at the balance sheet date. This position is calculated based on past history of the level of repairs and replacements. Additional specific provisions are booked
when required.
Litigations and consumption taxes
The Group recognizes the estimated country- and entity-specific risks relating to litigations with former personnel or direct
and indirect taxation.
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, and approximate number of employees who will be compensatedfor 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 not recognized in the balance sheet but are described in the notes.
2.17 Share capital
LEM Holding SA has only ordinary registered shares. Dividends on ordinary shares are recognized in equity in the period
in which they are declared.
Treasury shares
Own equity instruments which are reacquired (treasury shares) are recognized at cost and deducted from equity. Neither
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.

LEM | Annual Report 2014/15

44

2.18 Revenue recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue canbe reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.
Revenue from the sale of products comprises all revenues that are derived from sales of products to third parties after deduction of price rebates and value-added tax. Revenues from the sale of products are recognized when the significant risks andrewards of ownership of the goods have passed to the buyer, usually on delivery of the products.
2.19 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 or in other comprehensive income.
Deferred taxation
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax baseof assets and liabilities and their carrying amounts in the financial statements. Deferred taxes are determined using tax
rates that apply, or have been substantially enacted, on the balance 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 beavailable in the future against which the tax losses carried forward can be utilized. Deferred tax assets and liabilities areoffset against each other if the corresponding income taxes arise by the same tax authority and a legally enforceable rightfor offsetting exists.

LEM | Annual Report 2014/15

45

3 Segment information
Business segment information
Industry
In CHF thousands

Income statement
Sales
EBITDA
Operating profit
Net financial expenses
Taxes
Net profit for the year
Depreciation and amortization:
Tangible assets
Intangible assets
Total
Balance sheet
Segment assets
Nonallocated assets
Of which cash and cash equivalents
Of which other nonallocated assets
Total assets
Segment liabilities
Nonallocated liabilities
Of which income tax payable
Of which deferred tax liabilities
Of which other nonallocated liabilities
Total liabilities

Automotive

LEM Group

2014/15

2013/142014/15

2013/142014/15

2013/14221'042
55'44949'892211'065
57'05250'88836'715
6'052
4'317

34'573
6'200
4'840

257'757
61'501
54'209(2'674)(8'404)43'131

245'638
63'25255'728(1'379)(8'709)45'641

4'928
629
5'557

4'931
1'233
6'164

1'669
66
1'735

1'320
39
1'360

6'597
694
7'291

6'251
1'272
7'523

85'19887'80615'32914'39385'19887'80615'32914'393

100'527
41'08620'920
20'166
141'613102'199
42'47524'581
17'894
144'675

18'67824'732

5'925

3'700

18'67824'732

5'925

3'700

24'60325'068
10'225
1'869
12'97449'67128'43222'039
6'579
2'723
12'73750'471

4'713
3'404
8'117

5'667
1'322
6'989

1'439
565
2'004

1'607
216
1'824

6'151
3'969
10'121

7'275
1'538
8'813

Capital expenditures:
Tangible assets
Intangible assets
Total assets

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 measurement of current
and voltage of various industrial applications. The Automotive segment develops, manufactures and sells transducers forapplications in automotive markets.
Nonallocated assets correspond to cash, noncurrent financial receivables as well as deferred tax assets. Nonallocatedliabilities comprise bank borrowings, income tax payable and deferred tax liabilities.
Transactions between the subsidiaries and/or business segments are conducted at arm's length.
Amortization expense of intangible asset in Industry segment decreases by CHF 609 thousand as the useful life of the
IP asset added through a past business acquisition come to an end.
The evolution of intangible capital expenditure is mostly explained by the Enterprise Resource Planning; see note 8.
The decrease of segment liability is mostly explained by accounts payable; see note 10.
Geographical information
China
In CHF thousands

USA

Germany

Japan

Italy

Switzerland

Rest of the world

LEM Group

2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14 2014/15 2013/14

Sales

67'61956'428

Noncurrent assets

12'367

11'80440'96742'97334'344

Sales are reported as per place of transaction.

LEM | Annual Report 2014/15

46

35'662

26'16924'813

3'354

4'445

14'50113'790

2'565

3'519

71'59368'452 257'757 245'638

15'58911'653

3'296

3'032

34'60630'935

4 Accounts receivable
In CHF thousands

31.3.2015

31.3.2014

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

47'451(777)
46'674
3'452
50'12645'373(1'314)44'0594'232
48'290

In CHF thousands

2014/15

2013/14

Opening position

1'314

1'066

Additions charged/(reversals credited) to income statement
Amounts written off
Foreign exchange effect
Total

(560)
(30)
52
777

392
(101)
(43)
1'314

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 2014
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

32'5110
2'345
34'856

6'092
(0)
414
6'507

3'730
(244)
568
4'055

2'074
(433)
810
2'451

965
(637)
94
422

45'373(1'314)4'232
48'29031 March 2015
Accounts receivable – trade
Allowance for doubtful accounts
Other receivables
Total

30'7240
3'373
34'097

12'6110
7
12'619

3'064
(161)
31
2'934

562
(147)
0
415

490
(469)
40
61

47'451(777)
3'452
50'126The increase in receivables is mainly linked to the increase in sales, the days of sales outstanding ratio remains fairly
stable compared to the year 2013/14.
The allowance for doubtful accounts is computed as a percentage of aged balances plus an assessment of individual
recoverability. It corresponds to 1.6% of trade accounts receivable (2.9% in 2013/14). In 2014/15, no receivables havebeen individually impaired.
5 Inventories
In CHF thousands

31.3.2015

31.3.2014

Raw materialWork in progress
Finished goods and goods for resale
Total

12'001
1'177
14'367
27'545

12'185
1'451
14'85928'495The inventories include allowances of CHF 2'882 thousand (2013/14 CHF 2'934 thousand).

LEM | Annual Report 2014/15

47

6 Other current assets
In CHF thousands

Advances to suppliers
Prepayments and accrued income
Derivative financial instruments
Pension current assets
Other current assets
Total

31.3.2015

31.3.2014

634
1'348
342
0
14
2'338

530
1'386
455
2'278
55
4'704

The decrease of the pension current assets is linked to the decrease of the discount rate assumption, as elaborated innote 21.
For further information on derivative financial instruments, see note 24.
7 Property, plant and equipment
In CHF thousands

Land and buildings

Machinery andequipment

Total

25'373(1'174)
7'275(42)(6'251)
25'180Net book value 1 April 2013
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2014

165
(23)

(15)
126

25'209
(1'151)
7'275(42)(6'236)25'054

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2014

348
(222)
126

77'782(52'728)
25'05478'130(52'950)
25'180Net book value 1 April 2014
Foreign exchange effectInvestment
Disposal
Depreciation charge for the year
Net book value 31 March 2015

126
(7)

(14)
105

25'054
1'038
6'152
(38)
(6'582)25'62325'180
1'031
6'152
(38)
(6'597)25'728

At cost of acquisition
Accumulated depreciation
Net book value 31 March 2015

328
(223)
105

82'780(57'157)
25'623

83'108(57'380)
25'728

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48

8 Intangible assets
In CHF thousands

Goodwill

Patents

Other intangible assets

Total

Net book value 1 April 2013
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2014

3'350
(214)

1'320

(990)
330

1'230
(20)
1'538
(178)
(282)
2'289

5'900
(234)
1'538
(178)
(1'272)
5'755

At cost of acquisition
Accumulated amortization
Net book value 31 March 2014

3'136

4'950
(4'620)330

5'657(3'368)2'289

13'743(7'988)
5'755

330

(330)
0

2'289
(15)
3'969
(10)
(364)
5'869

5'755
(142)
3'969
(10)
(694)
8'878

4'950
(4'950)(0)

9'534(3'665)
5'869

17'493(8'615)
8'878

Net book value 1 April 2014
Foreign exchange effectInvestment
DisposalAmortization charge for the year
Net book value 31 March 2015
At cost of acquisition
Accumulated amortization
Net book value 31 March 2015

3'136

3'136
3'136
(127)

3'009
3'009
3'009

The increase in the intangible assets is mainly explained by the capitalization of costs related to the implementation of
the new ERP. The cumulative investment 2013/14 and 2014/15 amounts to CHF 4.2 million. The item is presented in'assets under construction' as per 31.3.2015 with a finalization and start of amortization as per 1.4.2015.
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 determined based onvalue-in-use calculations. These calculations use cash flow projections of five years based on financial business plans
and budgets approved by management. The projections include assumptions concerning revenue growth and expected
operating costs. Revenue growth is projected at 5% and operating costs were estimated based on the experience ofmanagement. The pretax discount rate used within these cash flow calculations is 7.1% (2013/14 9.0%) and is based on
the weighted average cost of capital of a peer 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 2015.
9 Other noncurrent assets
In CHF thousands

Pension noncurrent assets
Other noncurrent assets
Total

31.3.2015

31.3.2014

(0)
889
889

2'139
626
2'765

The decrease of the pension noncurrent assets is linked to the decrease of the discount rate assumption, as elaborated
in note 21.

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49

10 Accounts payable
In CHF thousands

31.3.2015

31.3.2014

Total accounts payable – trade
Other payables
Total

10'587
1'425
12'012

17'470
2'013
19'483In anticipation of the go-live of the new Enterprise Resource Planning (ERP) software in April 2015, LEM proceeded to an
early payment of its suppliers per end of March 2015, thereby decreasing the trade accounts payable as per 31.3.2015.
11 Provisions
Warranty andcustomer claims

Litigations andconsumption taxes

Balance as per 1 April 2013
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effect
Other movements
Balance as per 31 March 2014
Of which current
Of which noncurrent

3'087
1'434
(1'663)
(259)
(75)
(55)
2'468

0
868

Balance as per 1 April 2014
Additional provisions
Unused amounts reversed
Utilized during the year
Foreign exchange effect
Other movements
Balance as per 31 March 2015
Of which current
Of which noncurrent

2'468
1'478
(727)
(854)
6

910
208
(332)
(24)
23

(366)
(14)

2'371

785

199

In CHF thousands

(5)
(9)
55
910

Restructuring

Total

1'830
538
(438)
(1'256)
(96)

4'917
2'841
(2'101)(1'520)
(179)
0
3'957
1'070
2'886

579

579

3'957
1'686
(1'059)(1'244)
15
0
3'355
1'501
1'854

Warranty and customer claims
Provisions for warranty and customer claims have been estimated based on past experience and the risk assessment ofmanagement. The warranty provision is expected to be used over the next five years.
Litigations and consumption taxes
Despite the care that LEM applies in the separation process with personnel, such separation may result in legal conflicts.
The Group will defend its case and management estimates the reasonable risk to be provided for.
The Company operates in multiple jurisdictions with complex legal and tax regulatory environments. In the frame of thecontinuous improvement of its processes and systems, LEM has reviewed the consumption taxes in several countries. It
has appeared that some LEM's subsidiaries may not have been fully compliant with their local consumption tax regulations. As a consequence, LEM has estimated consumption tax provisions according to management best judgment.
Some of these positions are inherently uncertain and include the interpretation of local regulations applied to complex
transactions.

LEM | Annual Report 2014/15

50

Transfer of activity
As a continuation of a strategy initiated in 2004, LEM continues to relocate production lines from the plants in Machida,
Japan, and Geneva, Switzerland, to low-cost countries. The operations in Japan are significantly reduced and concentrated on the local Japanese market. In Switzerland, the operations are being progressively reduced and focused onhigh-complexity / high-precision products for worldwide markets. In parallel, LEM's site in Switzerland is being reinforced
with continued investment in R&D and marketing.
A provision had been constituted in 2012/13 in relation with the above-mentioned relocations of activity. During 2013/14
and 2014/15, LEM transferred a part of the production lines from Geneva, Switzerland, and from Machida, Japan, to Sofia,
Bulgaria, and Beijing, China and used most of the before-mentioned provisions. The provision position amounts to
CHF 199 thousand at 31.3.2015.
12 Other liabilities
In CHF thousands

Post-employment benefit plans
Other liabilities
Total
Of which current
Of which noncurrent

31.3.2015

31.3.2014

2'449
682
3'131
466
2'665

370
342
712
319
394

The increase of the post-employment benefit plan liability is linked to the decrease of the discount rate assumption, as
elaborated in note 21.
13 Equity
Share capital
The nominal share capital of CHF 570'000 comprises 1'140'000 registered shares, each with a nominal value of CHF
0.50. There is neither authorized nor conditional share capital outstanding.
Investments in shares of LEM Holding SA held by the Group are classified as treasury shares and are accounted for at
historical cost. Treasury shares are not entitled to dividends.
Movement of treasury shares
In number of shares, in CHF

Number of shares

Average purchasepriceTotal in CHF
thousands

Balance 1 April 2013
Movement
Balance 31 March 2014
Ordinary dividend per share

1'316
(232)
1'084
40.00

581.0083.96
687.38

765
(19)
745

Balance 1 April 2014
Movement
Balance 31 March 2015
Ordinary dividend per share

1'084
(719)
365
40.00

687.38642.54775.72

745
(462)
283

The dividend to be paid will be proposed by the Board of Directors to the ordinary General Meeting of the shareholders of
the Group on 25 June 2015. The expected payout for dividends amounts to CHF 45'585 thousand.

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51

14 Staff cost
In CHF thousands

2014/15

2013/14

Production
Sales
Administration
Research and development
Total(23'035)(17'126)(12'713)(10'399)(63'272)(22'455)(15'246)(10'926)(9'811)(58'438)

Salaries and wages
Other personnel costs
Temporary employee costs
Total(42'038)(18'258)(2'977)(63'272)(40'712)(15'519)(2'207)(58'438)

Number of employees at the end of the financial year

31.3.2015

31.3.2014

1'182
81
12
1'274

1'144
86
12
1'241

Permanent employees
Temporary employees
Apprentices
Total

Salaries and wages increase driven by the continued build-up of LEM Bulgaria and the increase of R&D spending in the Group.
Other personnel cost 2013/14 was impacted by a one-off saving of CHF 1.2 million linked to the change in the pension conversion ratio.
Other personnel costs comprise the expenses for defined contribution plans of CHF 243 thousand (2013/14 CHF 258 thousand).
See accounting policies 2.15 Employee benefits, 2.16 Provisions and contingent liabilities.
15 Financial expense
In CHF thousands

Interest expenses
Other financial expenses
Total

31.3.2015

31.3.2014

(146)
(104)
(251)

(44)
(77)
(121)

The Group incurred higher interest expense than in prior year, linked to more financing need for the higher dividend.
16 Financial income
In CHF thousands

31.3.2015

31.3.2014

199
199

133
133

In CHF thousands

31.3.2015

31.3.2014

Exchange gains/(losses)
Fair value revaluation on derivatives
Gains/(losses) on derivative 1
Total(2'536)(134)
49(2'622)(1'922)
1'591(1'060)(1'390)Interest income on cash
Total
17 Exchange effect1

Position includes cost of derivative hedging

The exchange effect is mainly driven by EUR devaluation in 2014/15. JPY and RUB devaluation further contributed to theloss, partially compensated by gains on USD and CNY positions.

LEM | Annual Report 2014/15

52

18 Income taxes, deferred tax assets and liabilities
The Group operates in multiple jurisdictions with complex legal and tax regulatory environments. In certain of these jurisdictions, the Group has taken income tax positions that management believes are supportable and are intended to withstand challenge by tax authorities. Some of these positions are inherently uncertain and include those relating to transfer
pricing matters and the interpretation of income tax laws applied to complex transactions. The Company periodicallyreassesses its tax positions. Changes to the financial statement recognition, measurement, and disclosure of tax positions are based on management's best judgment given any changes in the facts, circumstances, information available
and applicable tax laws. Considering all available information and the history of resolving income tax uncertainties, theGroup believes that the ultimate resolution of such matters will not have a material effect on its financial statements. Differences between the final tax outcome and the amounts that were initially recorded impact the income and deferredtaxes in the period in which such determinations are made. The Group calculates its expected average tax rate as aweighted average of the tax rates in the tax jurisdictions in which the Group operates.
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. Given thatthe new double taxation agreement between China and Switzerland reducing the withholding tax rate from 10% to 5%
has been formally enacted as per 15 November 2014, the Group has applied the new rate for the fiscal year 2014/15.
In CHF thousands

2014/15

2013/14

Current income taxes
Deferred taxes relating to the origination and reversal of temporary differences
Deferred tax income resulting from changes in tax rates
Adjustment recognized in the period for current tax of prior year
Total

(8'849)228(7)224(8'404)(7'795)(2'581)
1'568
100(8'709)The tax (expense)/income relating to components of other comprehensive income amount to CHF 1'092 thousand for theyear 2014/15 (CHF (421) thousand in 2013/14).
The Group's effective tax rate differs from the Group's average expected tax rate as follows:In %2014/15

2013/14Group's average expected income tax rate
Group's average expected ­w ithholding tax rate
Group's average expected tax rate

17.6
0.8
18.4

16.8
2.0
18.8

Tax effect of– – permanent differences– – effect of changes in tax rates on deferred taxes– – adjustment in respect of previous periods' income tax– – other differences
Group's effective tax rate

0.5
(2.4)
(0.4)
0.2
16.3

0.1
(2.9)
(0.1)
0.1
16.0

The decrease in the expected tax rate is mainly due to the change in the Chinese withholding tax as mentioned above.
This change has had a positive impact on the one-off effects of 2.4% linked to the revaluation of the withholding tax position from 10% to 5%.

LEM | Annual Report 2014/15

53

Deferred tax assets and liabilities
Deferred taxes have been calculated on the following balance sheet positions:31.3.2015
In CHF thousands– – Accounts receivable– – Inventories– – Property, plant and equipment– – Intangible assets– – Other financial assets– – Other assets– – Provisions– – Others– – Withholding tax on dividends
Gross deferred taxes

31.3.2014

Asset

Liability

Asset

Liability

118
934
1'780
860
652
35
514
847
0
5'740

(292)
(648)
(42)
(458)
(218)
0
0
(54)
(1'869)(3'581)

219
890
1'855
1'351
0
75
443
754
0
5'586

(337)
(254)
(17)
(553)
(1'062)(97)
0(47)(2'723)(5'090)The balance sheet contains the following:– – Deferred tax assets– – Deferred tax liabilities

4'418

4'103

(2'259)(3'607)

Net assets / (liabilities)

2'159

496

2014/15

2013/14

43'13145'6411'140'000
1'140'000
923
1'139'077

1'140'000
1'140'000
1'438
1'138'562

37.86

40.09

There were no unrecorded losses carried forward at 31.3.2015, nor at 31.3.2014.
19 Earnings per share

Basic and diluted 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
Weighted average number of ordinary shares
Weighted average number of treasury shares
Weighted average number of shares outstanding
Earnings per share – basic and diluted in CHF

20 Related parties
Related parties are the Board of Directors and the Executive 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 Executive
Management includes base salary, a performance-related bonus (LIS), bonus and post-employment benefits. In 2014/15
and 2013/14, no termination benefits have been paid. The base salary is the employee's compensation before deductionof the employee's social security contributions. Bonus payments are effected in cash.

LEM | Annual Report 2014/15

54

Compensation of the Board of Directors
In CHF thousands

2014/15

2013/14

Base salary
Additional fees
Total

(790)
(790)

(740)
(30)
(770)

In CHF thousands

2014/15

2013/14

Base salary
Bonus
Post-employment benefits
Total(1'886)(1'120)(190)(3'196)(1'740)(1'053)(161)(2'954)Compensation of the Executive Management

Servotronix Motion Control Ltd, a company presided by Ilan Cohen, has bought transducers for CHF 609 thousand in
2014/15 (CHF 163 thousand in 2013/14), including purchases done by its subsidiaries and subcontractors, from LEM
Group at market price. No other member of the Board of Directors has any significant business connection with LEM
Group.
For details on the compensation of the Board of Directors and of the Executive Management, please refer to note 11 in
the notes to the financial statements of LEM Holding SA. Also, see accounting policies 2.15 Employee benefits and note
2.16 Provisions and contingent liabilities.
21 Retirement benefit obligations
The Group operates a defined contribution plan for all its employees in Switzerland with a collective foundation.
This foundation is a separate legal entity which is not part of the Group. It is managed by a board having equal representation of employees and employers of the affiliated companies. It is supervised by the supervisory authority and complies
with the requirements of Swiss pension law. According to Swiss law, the pension plan is considered as a defined contribution plan whereas it is considered as a defined benefit plan under IAS 19 due to the various benefit guarantees includedin the laws.
The plan is funded by contributions from both employer and employees.
The plan participants are insured against the financial consequences of retirement, disability and death. The retirement
benefit is based on a notional individual savings account converted at retirement into a pension.
The assets of the foundation are invested into a diversified portfolio. Death in service and disability benefits are insured
with an insurance company. The pension plan does not expose the affiliated companies to any additional unusual risks.
During 2013/14, the conversion rate of the savings account into pension at retirement was changed. No curtailments or
settlements occurred in 2014/15.
As a consequence of the low-interest policy of the Swiss National Bank, the discount rate used for the evaluation of LEM's
pension obligations has been reduced from 2.0% to 0.9%, thereby increasing the obligations by CHF 11.9 million. The
plan assets showed a solid investment performance and increased by CHF 5.4 million. As a result, the overall funded
status reduced by CHF 6.5 million, from a CHF 4.4 million asset to a CHF 2.1 million liability. In application of IAS 19, thisadjustment was accounted for in other comprehensive income and did not impact the net profit for the year.
The subsidiaries abroad sponsor defined contribution plans based on local practices and regulations.
In CHF thousands

31.3.2015

31.3.2014

Fair value of plan assets at year-end
Defined benefit obligations at year-end
Funded status (net assets/(liabilities) in the balance sheet)

42'56444'661(2'098)37'17332'755
4'417

LEM expects to contribute CHF 2'114 thousand to its defined benefit plan in 2015/16.

LEM | Annual Report 2014/15

55

21.1 Cost of defined benefit plans
Cost of defined benefit plans
In CHF thousands

Current service cost
Past service (income)Net interest (income) / cost
Total pension expenses recorded in consolidated income statement

31.3.2015

31.3.2014

2'114
0
(88)
2'026

2'207
(1'329)(56)
821

Costs related to the pension plan were charged to the different functional departments based on salary costs.
In 2013/14, the past service income stems from the change in the conversion rate.
21.2 Remeasurements of employee benefits
Remeasurements of employee benefits
In CHF thousands

31.3.2015

31.3.2014

Experience adjustments on defined benefit obligation
Return on plan assets excluding interest
Total remeasurements recorded in other comprehensive income

8'310(3'214)
5'096

1'259
(3'145)(1'886)

In CHF thousands

31.3.2015

31.3.2014

Fair value of plan assets per beginning of year
Return on plan assets excluding interest income
Interest income on plan assets
Employer's contributions
Employees' contributions
Benefits paid
Fair value of plan assets per end of year

37'173
3'214
743
605
1'663
(834)
42'56435'711
3'145
714
534
1'582
(4'514)37'173

In CHF thousands

31.3.2015

31.3.2014

Defined benefit obligation per beginning of year
Current service cost
Employees' contributions
Interest costExperience adjustments on obligation
due to assumption changes
due to population changes
Benefits paid
Plan amendment
Defined benefit obligation per end of year

32'755
2'114
1'662
655
8'309
5'765
2'544
(834)
0
44'66132'893
2'207
1'582
658
1'259
0
1'259
(4'514)(1'329)32'75521.3 Change in fair value of plan assets
Change in fair value of plan assets

21.4 Change in present value of defined benefit obligation
Change in present value of defined benefit obligation

The weighted average duration of the Defined Benefit Obligation (DBO) at the end of the current fiscal year is 26 years.

LEM | Annual Report 2014/15

56

21.5 Asset allocation of investments
Major categories of plan assets as a percentage of the fair value of total plan assets
In %Equity securities
Debt securities
Real estate
Cash and other investments

Long-term target

2014/15

2013/14

30.0%
36.0%
20.0%
14.0%

34.0%
29.3%
24.3%
12.4%

34.1%
32.0%
19.1%
14.8%

100.0%

100.0%

100.0%

Strategic pension plan allocations are determined by the objective to achieve a return on investment, which, together
with the contribution paid, is sufficient to maintain reasonable control over the various funding risks of the plans. Estimated returns on assets are determined based on the asset allocation and are reviewed periodically. A temporary deviation from policy targets is allowed.
Cash as well as most equity and debt securities have a quoted market price in an active market. Other assets including
real estate and other investments do not have a quoted market price.
21.6 Actuarial assumptions
The principal actuarial assumptions used in the actuarial calculations include:In %2014/15

2013/14

Discount rate
Salary increases

0.90%
1.00%

2.00%
1.50%

The present value of the defined benefit obligation is determined annually by independent actuaries using the projected
unit credit method. Actuarial assumptions are required for this purpose.
Sensitivities of significant actuarial assumptions
The sensitivity analysis is based on reasonable possible changes as of the end of the year 2014/15. Each change in asignificant assumption was analyzed separately as part of the test.
The sensitivity of the DBO to changes in the main actuarial assumptions is as follows:
DBO increase/DBO (decrease) – In CHF thousands

Discount rate
Increase by 0.25%
Decrease by 0.25%
Salary increase rate
Increase by 0.25%
Decrease by 0.25%

2014/15

2013/14(1'696)
1'748(1'673)
1'802

514
(499)

146
(146)

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57

21.7 Maturity structure of pension obligation
The following main cash outflows are expected in future periods:
In CHF thousands

Within 1 year
Within 2 years
Within 3 years
Within 4 years
Within 5 years
Within 6 to 10 years

954
975
990
1'082
1'171
7'579

22 Operating lease commitments
Minimal lease payments are payable as follows:
In CHF thousands

31.3.2015

31.3.2014

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

4'616
15'927
1'492
22'035

3'906
14'960
3'866
22'732

In 2014/15 lease expenses amounted to CHF 4'839 thousand (2013/14 CHF 5'061 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.
23 Contingent liabilities
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.
For the years 2013/14 and 2014/15, there is no contingent liability from a consolidated point of view.
24 Financial risk management objectives and policies
The group classifies its financial assets and liabilities into the following categories as per IFRS 7:
Financial assets

31.3.2015
Fair value

31.3.2014
Fair value

Loans andreceivables

20'92050'126

24'581
48'290

X
X

342
14

455
55

X

0
889
72'291

21605
74'007X

In CHF thousands

31.3.2015
Fair value

31.3.2014
Fair value

Loans andreceivables

Accounts payable
Accrued expenses
Other current financial liabilities
Other noncurrent financial liabilities
Total

12'012
18'68827
16
30'74319'483
16'13327
24
35'667X
X
X
X

In CHF thousands

Cash and cash equivalents
Accounts receivable
Derivative financial instruments –current
Other current financial assets
Derivative financial instruments –noncurrent
Other noncurrent financial assets
Total

Financial liabilities

LEM | Annual Report 2014/15

58

At fair value throughprofit and loss

XX

At fair value throughprofit and loss

The management assessed that fair value level of cash and cash equivalents, accounts receivables, other current andnoncurrent assets, accounts payables, accrued expenses and other current and noncurrent liabilities that are not measured at fair value approximate their carrying amounts in view of their short-term nature and are consequently not separately disclosed.
The Group enters into derivative transactions such as currency risk reversal and forward 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 the 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 and disclosing 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 level 1 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 342 thousand per 31.3.2015 (financial asset of CHF 476 thousand
per 31.3.2014), all classified under level 2.
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 foreign exchange risks primarily to the USD, EUR, JPY, CNY and GBP.
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 states that 100% of LEM's net exposure for the main currencies EUR and USD is to be hedged on a rolling
12-month basis for EUR and USD.
Currency risks also arise from translation differences that are not hedged by the Group when preparing the consolidated financial statements in CHF. The foreign exchange translation is excluded from the calculation of the sensitivity analysis for currency
risk below.
Sensitivity analysis for currency risk
The sensitivity analysis is performed per 31.3.2015 with a 5% change in the USD, EUR, JPY, CNY and GBP with all othervariables held constant of the Group's profit before tax (due to the changes in the fair value of the monetary assets andliabilities) and the Group's equity.
The sensitivity analysis performed for the financial year shows an impact of CHF ±587 thousand for a ±5% EUR ratechange (CHF ±496 thousand per 31.3.2014), of CHF ±646 thousand for a ±5% USD rate change (CHF ±538 thousand
per 31.3.2014) and of CHF ±742 thousand for a ±5% CNY rate change (CHF ±541 thousand per 31.3.2014). For othercurrencies, there is no significant impact. There is no significant impact on the Group's equity.

LEM | Annual Report 2014/15

59

Credit risk
Credit risk is the risk that a financial loss occurs if a counterparty is unable or unwilling to fulfill its contractual payment
obligation.
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 trade on 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 in note 4.
There are no significant concentrations of risk within the Group.
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 from default 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 is either
done centrally and passed on as an intercompany loan, or given directly by the bank to the subsidiary with a reduction of
the Group's total credit line.
The total leverage of the Group is low, the financial liabilities mature in less than one year based on the carrying value ofborrowings reflected in the financial statements.
Financial liabilities
In CHF thousands

31.3.2015
Fair valueLess than
one yearOver oneyear

31.3.2014
Fair valueLess than
one yearOver oneyear

Accounts payable
Accrued expenses
Other current financial liabilities
Other noncurrent financial liabilities
Total

12'012
18'68827
16
30'74312'012
18'68827
030'727

0
0
0
16
16

19'483
16'13327
24
35'667

19'483
16'13327
035'643

0
0
0
24
24

Interest rate risk
The Group's exposure to the risk of changes in market interest rates with the current financial leverage is very low. Per
31.3.2015, there is no bank loan.
Capital management
The primary objective of the Group's capital management is to ensure that it maintains a healthy and stable equity ratio
in order 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 the consolidated 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 2014/15

60

25 Scope of consolidation
Full consolidation

Country

Currency

Share capital

Ownership

EuropeLEM Deutschland GmbHLEM Holding SA
LEM International SA
LEM Intellectual Property SA
LEM Switzerland SA
LEM Bulgaria EOOD
LEM Russia Ltd
LEM Management Services SARL

Germany
Switzerland
Switzerland
Switzerland
Switzerland
Bulgaria
RussiaSwitzerland

EUR
CHF
CHF
CHF
CHF
BGN
RUB
CHF

75'000570'000
100'000
300'000
1'000'000
1'971'830
8'600'000
20'000

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%

26 Changes in scope of consolidation
In 2012/13, LEM had launched a project aiming to simplify the structure of its European agency companies and to saveadministrative cost. As per 31.3.2014, LEM had already converted most of its European entities into branches of a European head office:– – On 1 December 2012, LEM Denmark was created as a branch of LEM Deutschland GmbH. The former company incorporated as LEM Danfysik A/S was liquidated per 8 April 2013.
– – On 1 January 2013, LEM UK was created as a branch of LEM Deutschland GmbH. The former company incorporated
as LEM UK Ltd was liquidated per 15 May 2013.
– – On 1 January 2013, LEM Italy Srl was merged into LEM Deutschland GmbH.
In 2014/15, the Group finalized the conversion with the absorption of LEM France and LEM Belgium into LEM DeutschlandGmbH:– – On 2 February 2015, LEM France Sàrl was merged into LEM Deutschland GmbH.
– – On 2 February 2015, LEM Belgium Sàrl was merged into LEM Deutschland GmbH.
27 Events after the balance sheet date
The new double tax treaty between China and Switzerland reducing the withholding tax rate on dividends from 10% to
5% entered into force on 15 November 2014. On 28 April 2015, LEM China received the approval from the local tax authorities to apply the new withholding tax rate on future dividend distributions. LEM Holding received a first dividend of CNY
28.5 million after deduction of 5% withholding tax (CHF 4.3 million) on 11 May 2015. A second dividend payment is expectedin Q1 of 2015/16 for CNY 95 million after deduction of 5% withholding tax (CHF 14.2 million using the exchange rate on
11 May 2015).
As per 4 April 2015, LEM Deutschland GmbH changed its name to LEM Europe GmbH.

LEM | Annual Report 2014/15

61

Auditor's Report
Report of the statutory auditor on the consolidated financial statements
As statutory auditor, we have audited the consolidated financial statements of LEM Holding SA, which comprise the statement of financial position, income statement, cash flow statement, statement of comprehensive income, statement ofchanges in equity and notes (pages 35 to 61), for the year ended 31 March 2015.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of these consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable inthe circumstances.
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 depend on the auditor's judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers the internal control system relevant to the entity's preparation of the consolidated
financial statements in order to 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 the accounting policies used and the reasonableness of accounting estimates made, as well
as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence wehave obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements for the year ended 31 March 2015 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 are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists, which has been designed for the preparation of consolidated financial statements according to the
instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
Lancy, 26 May 2015
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

LEM | Annual Report 2014/15

Karine Badertscher Chamoso
Licensed audit expert

62

LEM Holding SA
Financial Statements

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . 66
Proposed Appropriation of Available Earnings . . . . . . .

70

Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

71

LEM | Annual Report 2014/15

63

LEM | Annual Report 2014/15

64

Balance Sheet(before distribution of earnings)

AssetsIn CHF thousands

Notes

31.3.2015

31.3.2014

1
2
3

6'678
27'570283
477
35'00912'10724'436745
685
37'973

4

45'18345'18345'02445'02480'19282'997Notes

31.3.2015

31.3.20142

22'865
1'772
24'637

14'715
1'499
16'2140

0

24'637

16'214570
285
283
20'07634'34055'554570
285
745
33'55731'62566'78380'19282'997

Current assets
Cash and cash equivalents
Group current assets
Treasury shares
Other current assets
Total current assets
Noncurrent assets
Investments in subsidiaries
Total noncurrent assets
Total assets
Liabilities and Equity
In CHF thousands

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

5
3

LEM | Annual Report 2014/15

65

Income Statement

IncomeIn CHF thousands

Notes

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

2014/15

2013/1432'593
822
1'215
9
5'258
39'89631'285
814
2'086
128
4'984
39'296Notes

2014/15

2013/144
6

0(2'984)(265)(1'976)(5'226)(1'373)(2'843)(361)(3'191)(7'767)34'67031'530(330)
34'34096
31'625

7

ExpenseIn CHF thousands

Loss on investments in subsidiaries
Office, administration and personnel expense
Financial expense
Foreign exchange loss
Total expense

7

Profit before taxes
Income taxes
Net profit for the year

8

Notes to the Financial Statements
Principles for the establishment of the financial statements
The accompanying financial statements have been prepared in accordance with the requirements of the Swiss Code ofObligations. Regarding the inclusion of LEM Holding SA in the consolidated financial statements, the accounting andreporting principles described in the notes to the consolidated financial statements apply.
1 Cash and cash equivalents
In CHF thousands

Cash and cash equivalents
Total

31.3.2015

31.3.2014

6'678
6'678

12'107
12'107In light of the expected application of the new 5% withholding tax rate on dividends in China, as opposed to 10% before,
LEM Holding has delayed dividend payment from LEM China. This explains most of the decrease in cash and cash equivalents during the reporting period.
2 Group current assets and liabilities
In CHF thousands

31.3.2015

31.3.2014

Current intercompany loans receivable
Intercompany accounts receivable
Total

26'839731
27'57023'939497
24'436

Current intercompany loans payable
Intercompany accounts payable
Total

22'78382
22'86514'62194
14'715The current intercompany loans payable increase is mainly due to the changes in net working capital and the resulting
net financing need of the Group's subsidiaries.

LEM | Annual Report 2014/15

66

3 Treasury shares

Value 1.4.2013
ChangeValue 31.3.2014
ChangeValue 31.3.2015

Number of shares

Price pershare in CHF

Value in CHF
thousands

1'316
(232)
1'084
(719)
365

581.0083.94
687.38642.54775.72

765
(19)
745
(462)
283

The movements in treasury shares during 2013/14 caused an impact of CHF - 19 thousand in retained earnings throughmarket-making activities.
The movements in treasury shares during 2014/15 caused an impact of CHF - 462 thousand in retained earnings throughmarket-making activities.
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.
4 Investments in subsidiaries
In CHF thousands

31.3.2015

31.3.2014

Historical cost
Total

45'18345'18345'02445'024The increase in investments in subsidiaries is linked to a share capital increase in LEM Russia LLC.
Refer also to note 25 Scope of consolidation of the consolidated financial statements.
5 Share capital
Par value pershare in CHF

Capital in CHF
thousands

0.50
0.50

570
0
570

2014/15

2013/14(1'904)
(790)
(79)
(71)
(140)
(2'984)(1'731)
(770)
(108)
(99)
(135)
(2'843)

In CHF thousands

2014/15

2013/14

Exchange gains/(losses) 1
Fair value revaluation on derivatives 1
Gains/(losses) on derivative 2
Exchange effect

(676)
(134)
49
(762)

(1'636)
1'591(1'060)(1'105)

Number of shares

Opening capital 1.4.2014
Change of capital
Closing capital 31.3.2015

1'140'00001'140'000

6 Office, administration and personnel expense
In CHF thousands

Office and administration expense
Board member fees
Consulting fees
Withholding taxes on paid dividend repatriation
Other withholding taxes not recoverable
Total
7 Exchange effect

1 Positions exclude unrealized gains on long terms assets and liabilities, as per Swiss Code of Obligations
2 Position includes cost of derivative hedging.

LEM | Annual Report 2014/15

67

8 Income taxes
In CHF thousands

2014/15

2013/14

Current taxes
Adjustments of tax provisions of previous periods
Total

(266)
(64)
(330)

(192)
288
96

9 Important shareholders according to article 663c of the Swiss Code of Obligations
The following shareholders held 3% or more of the share capital and voting rights on 31 March 2015:
All positions per 31.3.2015

Shares

Options

Position

In %Werner O. Weber and Ueli Wampfler, in Zollikon/Wollerau, Switzerland,through WEMACO Invest AG and Swisa AG, in Zug/Cham, Switzerland
Ruth Wertheimer, in Kfar Shmaryahu, Israel, through 7-Industries
Holding B.V., in Amsterdam, Netherlands
Montanaro Asset Management Ltd, London, United Kingdom
Sarasin Investmentfonds AG, in Basel, Switzerland
Erwin Studer and Joraem de Chavonay, in Zollikon/Zug, Switzerland
Shareholders < 3%
Total

480'000

30'000510'000

44.7%

141'581

N/N

141'581

12.4%

74'83459'81330'000353'772
1'140'000

N/N
N/N(30'000)
N/N
074'83459'8130353'772
1'140'000

6.6%
5.2%
0.0%
31.0%
100.0%

N/N = none notified

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

Amount of guarantees issued

31.3.2015

31.3.2014

1'834

1'811

11 Remuneration of Board of Directors and Executive Management
11.1 Compensation to active members of the Board of Directors
2014/15
In CHF thousands

Andreas Hürlimann
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 6
Ueli Wampfler 3
Total

1, 4, 7

Annual salary

Additional fees

Total compensation

Employer's
contribution to social
security charges

280
190
100
100
120
790

0
0
0
0
0
0

280
190
100
100
120
790

18
17
0
0
8
42

The aggregate total amount of compensation of the Board of Directors in 2014/15 amounted to CHF 832 thousand.
2013/14
In CHF thousands

Andreas Hürlimann
Peter Rutishauser 2, 5, 8
Ilan Cohen 8
Norbert Hess 4
Ueli Wampfler 3
Total

1, 6, 7irman of the Board
2
Vice Chairman of the Board
3
Chairman of the Audit & Risk Committee

LEM | Annual Report 2014/15

Annual salary

Additional fees

Total compensation

Employer's
contribution to social
security charges

260
160
100
100
120
740

15
15
0
0
0
30

275
175
100
100
120
770

17
16
0
0
8
40

Member of the Audit & Risk Committee
Chairman of the Nomination & Compensation Committee
6
Member of the Nomination & Compensation Committee

68

4

7

5

8

Chairman of the Strategy Committee
Member of the Strategy Committee

11.2 Compensation to active members of the Executive Management of the LEM Group
2014/15
In CHF thousands

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

BasesalaryLIS 1
short-term variable
compensation

LIS 2
long-term variable
compensation

Company's
contribution topension fund

480
1'406

245
386

192
298

61
129

977
2'219

78
174

1'886

631

490

190

3'196

252

Base
salaryLIS 1
short-term variable
compensation

LIS 2
long-term variable
compensation

Company's
contribution topension fund

480
1'259

231
379

169
275

50
111

930
2'034

67
154

1'740

610

444

161

2'954

222

2013/14
In CHF thousands

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

Company's
Total contribution to social
security charges
compensation

Company's
Total contribution to social
security charges
compensation

CEO François Gabella was the Executive Management member with the highest total compensation in 2013/14 and in
2014/15.
The amounts are shown as follows:– – Base salary: as paid out in the reporting period– – LIS 1 and 2 2014/15: as proposed to the ordinary General Meeting in June 2015 for payout in July 2015
– – LIS 2 2014/15: as accrued for in the reporting period for payout in July 2015
– – LIS 1 and 2 2013/14: as paid out in June 2014
– – Pension fund contribution and company contribution to social security charges: as paid out or accrued for in thereporting period
11.3 Shareholdings
Board of Directors

31.3.2015

31.3.2014

In number of shares/options

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

Andreas Hürlimann
Peter Rutishauser
Ilan Cohen
Norbert Hess
Ueli Wampfler
Total

793
2'606
170
0
55'00058'56900
00
10'000
10'000

724
2'606
140
0
30'50033'970000030'00030'000

Number ofshares held

Number ofoptions held

Number ofshares held

Number ofoptions held

400
0
2'100
1'265
1'500
1'100
6'365

0
0
0
0
0
0
0

150
140
2'100
1'265
1'500
1'100
6'255

0
0
0
0
0
0
0

Executive Management
In number of shares/options

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

31.3.2015

31.3.2014

LEM | Annual Report 2014/15

69

12 Business risk management
In compliance with Swiss law, LEM is using a standardized procedure to analyze its business risks. LEM's risk management
covers all types of risk: financial, operational and strategic – including the external business environment, compliance andreputational aspects.
The Executive 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 first step, potential hazards are evaluated and a consensual list with10 to 15 main hazards is set up. In a second step, each hazard is assessed by a multiplication of probability with frequency.
Step two results in a risk map which visualizes LEM's potential risk environment. In step three an action plan is put in place
to manage the risks. The hazards thereafter are revalued a second time, taking into consideration the action plan. In step
four the action plan is validated and thereafter monitored on a monthly basis (step five).
The organization, principles and reporting of risk management are described in detail in the Corporate Governance section
3 in this Annual Report.
13 Events after the balance sheet date
The new double tax treaty between China and Switzerland reducing the withholding tax rate on dividends from 10% to 5%
entered into force on 15 November 2014. On 21 April 2015, LEM China received the approval from the local tax authorities
to apply the new withholding tax rate on future dividend distributions. LEM Holding received a first dividend of CNY 28.5
million after deduction of 5% withholding tax (CHF 4.3 million) on 11 May 2015. A second dividend payment is expectedin Q1 of 2015/16 for CNY 95 million after deduction of 5% withholding tax (CHF 14.2 million using the exchange rate
on 11 May 2015).

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

31.3.2015

31.3.2014

Balance brought forward from previous year
Variation of treasury shares
Net profit for the year
Total available earnings

19'615
462
34'34054'41733'53820
31'62565'183

Proposal of the Board of Directors:
Ordinary dividend
Balance to be carried forward(45'585)
8'831(45'568)
19'615

		
The Board of Directors proposes the distribution of an ordinary dividend of CHF 40 per share. Net of 35% withholding
tax, this is an ordinary cash dividend of CHF 26 per share.
The proposed appropriation of available earnings is made in compliance with article 671 of the Code of Obligations.
Shares held by LEM Holding SA or any of its subsidiaries are not entitled to dividends.

LEM | Annual Report 2014/15

70

Auditor's Report
Report of the statutory auditor on the financial statements
As statutory auditor, we have audited the financial statements of LEM Holding SA, which comprise the balance sheet,income statement and notes (pages 65 to 70), for the year ended 31 March 2015.
Board of Directors' responsibility
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirementsof 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 Board of 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 of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity's preparation of the financial statements in order to 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 the accounting
policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of thefinancial statements. We believe that the 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 2015 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 instructionsof 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, 26 May 2015
Ernst & Young Ltd

Arthur Bergmann
Licensed audit expert(Auditor in charge)

Karine Badertscher Chamoso
Licensed audit expert

LEM | Annual Report 2014/15

71

Information for Investors
Number of registered shareholders

31.3.2015

31.3.2014

742
73
8
5
828

574
67
7
7
655

31.3.2015

31.3.2014

52.2
26.6
5.8
0.0
15.3
100.0

52.0
31.6
3.5
0.1
12.8
100.0

1 – 499
500 – 4'999
5'000 – 49'999
50'000 and more
Total

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)

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

Share price development LEM Holding SA (LEHN) compared to SPI
900

CHF

800
700
600
500
400
300
200

LEHN

100

SPI

0
4.1.104.9.104.3.11

4.9.11

Source: Bloomberg

LEM | Annual Report 2014/15

72

4.3.124.9.124.5.134.11.134.5.144.11.144.5.15

Share information
In number of shares, 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 March 1 (in CHF millions)
12

2014/15

2013/141'140'000
808
626
798.50
586
37.86
40
910

1'140'000
712
547
703
369
40.09
40
801

Source: SIX
Proposal of the Board of Directors to the ordinary General Meeting of the Shareholders.

Financial calendar of the financial year 1 April 2015 to 31 March 2016
25 June 2015
30 June 2015
2 July 2015
11 August 2015
11 November 201516 February 2016
9 June 2016
30 June 2016
5 July 2016
7 July 2016

Ordinary Meeting of the Shareholders
Université de Fribourg, bvd. de Pérolles
Dividend ex-date
Dividend payment date
First quarter results 2015/16
Half-year results 2015/16
Third quarter results 2015/16
Year-end results 2015/16
Ordinary General Meeting of the Shareholders
Dividend ex-date
Dividend payment dateContact
Julius Renk (CFO)
Phone: +41 22 706 12 50
E-mail: investor@lem.com

LEM | Annual Report 2014/15

73

Group Subsidiaries
LEM is a global player with production plants and development centers in Beijing (China), Geneva (Switzerland), Machida (Japan)
and Sofia (Bulgaria). The company has sales offices at all its customers' 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
EuropeLEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg> Julius Renk

LEM Deutschland GmbH, Succursale Italia
Via V. Bellini, 7I-35030 Selvazzano Dentro, PD> Tiziano Rossato

LEM Intellectual Property SA
Avenue Beauregard 1
CH-1700 Fribourg> Jean-Marc Peccoux

LEM Deutschland GmbH, Branch UK
West Lancs Investment Centre
UK-Skelmersdale WN8 9TG> Brian Carter

LEM International SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Julius Renk

LEM Bulgaria EOOD
Iliensko Shose 8
BG-1220 Sofia> Boryan Borisov
LEM Russia, LLC
Starickoe Shosse 15
RU-170040 Tver
> Pavel Sobol

LEM Switzerland SA
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Simon Siggen
LEM Management Services Sàrl
Chemin des Aulx 8
P.O. Box 35
CH-1228 Plan-les-Ouates> Martin Hoffmann

Asia
LEM Electronics (China) Co. Ltd
Linhe Street 28, Shunyi District
CN-101300 Beijing> Jin JianLEM Japan KK
2-1-2 Nakamachi
JP-Machida, 194-0021 Tokyo> Hiroaki Mizoguchi

LEM Deutschland GmbH
Frankfurter Straße 74
D-64521 Groß-Gerau> Hartmut Graffert
LEM Deutschland GmbH, Branch Austria
Concorde Business Park 2/F/6
A-2320 Schwechat> Thomas Burda

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

LEM Deutschland GmbH, Branch Belgium
Egelantierlaan 2
B-1851 Humbeek> Yves Declerck

LEM Management Services Sàrl, Branch Korea
D-Cube 15F, Gyeongin-Ro 662
KR-152-706 Guro-Gu, Seoul> Steve BaeLEM Deutschland GmbH Denmark,Filial af LEM Deutschland GmbH
Christian X's Alle 168
DK-2800 Kgs. Lyngby> Klaus Corell-Kramer
LEM Deutschland GmbH, Succursale France
Avenue Galois 15
F-92340 Bourg-la-Reine> Yves Declerck
LEM | Annual Report 2014/15

74

North America
LEM U.S.A., Inc.
11665 West Bradley Road
USA-Milwaukee, WI 53224> John Marino

Imprint© LEM Holding SA, Fribourg
Concept and text
LEM
Gregor Communications, Zurich
DesignTGG Hafen Senn Stieger, St. Gallen
Images, Illustrations
LEM
Aurélien Bergot/Pedro Neto, Whitebalance Studio
Enol Chen, Enol StudioJasmin Viertl
Printing
Cavelti, Gossau

LEM Holding SA
Avenue Beauregard 1
CH-1700 Fribourg
Phone: +41 26 460 10 30
Fax: +41 26 460 10 39
www.lem.com
LEM | Annual Report 2014/15

76